Thursday, May 7, 2009

The Competition - New Zealand

For the first two months of 2009, U.S. imports of cheese were 17,314 metric tonnes. New Zealand accounted for 8593 metric tonnes or 50% of the total imports. There were no "close seconds"! This post reviews a few facts about the New Zealand Diary Industry, a strong influencer of the U.S. cheese prices.

New Zealand's population is 4,173,400. The U.S. population is 394, 590,000 - almost a 100:1 difference!

However, when it comes to cows, New Zealand has 4,013,000 cows compared to 9,315,000 in the U.S.
In other words, New Zealand has nearly one cow for each person. In the U.S. one cow has to be shared by approximately 42 people.
Because no one can consume 50+ lbs. of milk a day, obviously, New Zealand's dairy business is primarily an export business.

New Zealand's dairy industry is really focused on milk solids - defined as Milk Fat + Protein. The graph below shows the growth in milk solids per cow over the last 16 years.

Milk Solids (Milk Fat & Protein)

New Zealand's dairies have averaged 3.7% protein and 4.7% milk fat in 2008. Clearly, New Zealand is a fine-tuned cheese machine.

What kind of cows produce this? Shown below is the breakdown of the New Zealand dairy industry by breed.

As shown in an earlier post, cheese imports into the U.S. from New Zealand spiked at the end of 2008 which was one of the factors that caused a huge decrease in the price of U.S. cheese.

Currency exchange rates were the primary factor for the change in imports. Shown below is the exchange rates between the New Zealand Dollar and the U.S. Dollar.

Much of the data in this post was taken from the newly-published 2008 New Zealand Dairy Statistics.

New Zealand's dairy industry is the competition, not the neighbor's dairy farm. What can be done about it? There will be more discussion in a future post.

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