January 10, 2023

 

New Zealand will not benefit from declining cattle and farm numbers in France

Milk exporters from New Zealand will not benefit from concerns in the French dairy sector, such as declining cattle and farm numbers in France, as there are still trade barriers in most products even after the EU-NZ trade deal comes into force, UK Daily News reported.

 

The European Milk Board (EMB), which cited the most recent census results from the French Ministry of Agriculture, said 13,000 farms, or 25% of France's milk producers, closed between 2010 and 2020.

 

EMB also emphasised a French industry prediction that by 2030, there would be 441,000 fewer dairy cattle in the country.

 

French livestock institute IDELE said the country had 3.6 million dairy cattle and 736,000 heifers in 2020, which is a decrease of 8.2% and 15.1% respectively, from 2015.

 

Despite the fact that EMB pointed out that some French dairy regions would be more negatively impacted than others, the overall situation was worrying.

 

EMB said in 2010, 32% of dairy farmers were over the age of 50. Today, that number is 48%, with 28% of them being over the age of 55.

 

The replacement rate for dairy farmers, according to IDELE, is only 45%, which is significantly lower than the average replacement rate of 71% for all agricultural sectors.

 

For French dairy farmers, 2020 was marred by challenges, based on EMB's recently released national accounts. The data also showed an increase in farm spending, including feed, labour, and energy costs, while dairy farm economic results continued to decline.

 

The New Zealand Dairy Industry Association (DCANZ), which represents the country's largest milk processors and producers including Fonterra, said that while all of this may seem encouraging for New Zealand's milk export prospects, the situation isn't that straightforward.

 

The largest milk exporters in the world are Europe and New Zealand.

 

Kimberly Crewther, DCANZ Managing Director, said while milk production in France declined 4% (about 1 million tonnes) between 2015 and 2021, total EU production increased by 6 million worldwide over the same period in 2022, according to an International Dairy Federation (IDF) status report.

 

In addition, the EU Dairy Observatory noted that although EU production decreased by 0.2% and French production increased by 1% in the 10 months leading up to October 2022 compared to the same period in 2021, recent months have seen a rebound in EU production.

 

Crewther stated that even after the EU-NZ trade agreement comes into force, they will continue to face significant trade barriers in the majority of products, in reference to New Zealand milk exports to the EU.

 

She said the dairy agreement has had only modest results. The trade in milk between New Zealand and the EU will continue to be severely constrained by these tariff barriers.

 

OECD predictions showed New Zealand's milk production would be comparatively stable by 2030, while production in the EU would slightly increase.

 

Crewther said there will be variations among the various member nations within this overall EU picture, adding that there are a lot of internal trade among the EU27 nations; for instance, about 4 million tonnes of cheese are traded duty-free among them.

 

She said the forecast for a relatively modest increase in milk production from New Zealand and the EU coincides with ongoing demand growth on the global milk market.

 

This implied that other markets would likely have the biggest influence on trade flows.

 

According to the IDF's World Status Report, between 2015 and 2021, French dairy herd shrank by 146,000 cattle while the Indian dairy herd increased by 11.25 million cattle.

 

With two-way trade in goods and services worth NZD 17.5 billion in 2021, the EU is New Zealand's fourth-largest trading partner.

 

The EU-New Zealand free trade agreement (FTA) was signed in July of last year. The New Zealand government stated that it will go into effect in 2035 and that the market has close to 450 million consumers.

 

The government also said tariffs on New Zealand's exports of goods to the EU between 2017 and 2019 (prior to COVID-19) cost an estimated US$115 million annually.

 

According to the FTA, 91.4% of EU tariffs would be removed when it went into effect, 98.5% after seven years, and 91% of New Zealand's current trade in goods would enter the EU duty-free from the start.

 

After seven years, that percentage would rise to 97%. Upon going into effect, the estimated tariff savings would be more than US$100 million per year, and after seven years, they would increase to US$110 million.

 

The New Zealand government said starting in 2035, the FTA is predicted to boost exports to the EU by up to US$1.8 billion annually. Additionally, it would create valuable new quotas for beef and dairy.

 

The dairy and beef industries, the two pillars of New Zealand's export economy, were disappointed with the deal's outcomes because they felt that they fell far short of what they had hoped for.

 

Meat, fruit, alcoholic beverages, including wine, and seafood are New Zealand's top agricultural exports to the EU.

 

Malcolm Bailey, the chairman of DCANZ, said at the time that although the FTA had initially suggested a modest trade opening, the government's calculations had greatly overestimated the advantages.

 

He said there would be very little growth in the volume of New Zealand's milk exports, and some volume would still be restricted by tariff quotas.

 

Although New Zealand could export cheese to the EU, its share of the market would be minimal.

 

He also said the EU deal was very different from the trade agreement New Zealand has signed with China because it remains severely constrained and the ability to grow beyond small volumes will not be there.

-      UK Daily News