New report wake-up call for dairy export sector

An international dairy report has shown Fonterra is adding little value to its dairy exports compared to European and Chinese dairy companies, exposing the weakness of the National Government’s volume-led dairy strategy, the Green Party said today.

The International Farm Comparison Network's (IFCN) 2014 dairy company survey ranks the world’s largest milk processors in terms of milk volume collected and the estimated turnover per kg milk – a crude indicator of value creation. While Fonterra ranks second in the world on milk volumes, it ranks below average for adding value.

“One of the world’s largest dairy exporters – Fonterra – is also one of the worst at adding value to its exports,” Green Party Co-leader Dr Russel Norman said today.

“This report is a wake-up call for our dairy export sector and highlights the weakness of the National Government’s volume-led export strategy.

“We need to rethink how we’re adding value to our big exports.

“French dairy company Danone is adding nearly three times more value to its dairy sales than Fonterra, the IFCN study has found.

“For too long, New Zealand companies have failed to capture more of the value of the products we produce here. We are becoming ever more reliant on increasing the volume of exports of simple commodities like milk powder and logs.

“National is not helping our most critical businesses build a strong, value-added export sector.

“Government can work alongside business to add value by encouraging innovation and protecting our lucrative clean, green brand.

“New Zealand’s investment in innovation is poor; we invest half what most other developed countries do on research and development.

“Instead of closing the innovation gap, National is planning on cutting its innovation investment by 10.2 percent over the next three years in real terms.

“Even the National Government’s own 2011 review of innovation recommended progressive increases in government investment in R&D to at least match the OECD average.

“We can also encourage companies like Fonterra to move up the value-added chain by strengthening our environmental standards to protect our rivers and lakes from dairy pollution.

“Until we break the commodity-thinking that dominates our primary sector, we’ll never enjoy the high standards of living other small, developed nations enjoy,” said Dr Norman.

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