What does Tasmania have that New Zealand dairy farmers want?

Cheryl McCarty, the chairman of Tasmania’s dairy industry, made the shift across the ditch from New Zealand 18 years ago. Today many of her fellow Kiwis are looking to follow suit.

Dairy is a boom industry in New Zealand, the talk is of a “white gold rush” as export demand surges. 

But that popularity has now started to work against farmers with many mum and dad dairy farmers priced out of the industry. Enter Tasmania as an export destination - not for milk but farmers.

Land values in New Zealand for dairy are commonly above $30,000 per hectare – with median prices by district upwards of $32,164 per hectare in 2014. McCarty tells BlueNotes prime dairy land in the Waikato might hit $70,000 per hectare whereas Tasmania still has land on offer for as little as $10-12,000.

“And in many ways, climate, soils, pasture, Tasmania is very similar,” she says.

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Over the five years from 2004 to 2009 the net number of New Zealand citizens increased by 79 per cent in Tasmania. According to Peter Karam, Director of Corporate Agribusiness at ANZ, “Tasmania has essentially the same climate and profitability of dairy farms as New Zealand with the added advantage of being affordable to purchase now. It makes sense that Kiwis would look to Tassie to enter the dairy industry.”

The average land value of Tasmania’s dairy farms is around $17,000 per hectare. Whilst the anticipated profit for a comparable dairy farm in New Zealand and Tasmania is similar - the higher price of land is forming a significant barrier to entry for many hopeful farmers, driving their interest in the smallest Australian state.

Dairy in Tasmania is a growing industry, with milk production increasing by around 20 per cent over the past 10 years, while Australian milk production declined by 15 per cent. Tasmania has an ambitious target to increase milk supply by 350 million litres a year. The Tasmanian Government has high hopes for the sector, committing to grow it tenfold to $10 billion by 2050 as part of their ‘Agrivision 2050 plan’.

McCarty says productivity is a key focus for Dairy Tas and that includes innovations such as robotic milking, feed pads, sheds and, especially, better management of effluent – as a resource for fertilising pasture rather than waste.

“Environmental compliance and regulation is now a big issue in New Zealand but in Tasmania we have been quite pro-active, we think we are ahead and that means the regulatory costs are not as high,” she says.

Dairy Australia recently released the results of the National Dairy Farmers Survey – overall, 73 per cent of farmers are positive about the future of the industry, compared to 43 per cent at this time last year.  Sentiment in Tasmania is even better, with 91 per cent of farmers positive, and a 9.1 per cent production increase expected over the next 12 months, against a national forecast of 6.9 per cent.

There is significant opportunity in irrigating historic dryland grazing country, allowing for conversion to dairy farms. Capital and management expertise is required to carry off the conversion – something many Kiwis possess.

That’s not to say the pastures are all greener, Tasmania lacks some of the advantages New Zealand currently possesses. “For example, a Free Trade Agreement with China,” says Karam. “Australia and Tasmania as a result haven’t yet been able to fully exploit the opportunities available within the region compared to New Zealand.” This means that dairy farms face tougher regulatory and market access hurdles compared with their rivals across the ditch.

That said, McCarty says the nature of the domestic market in Tasmania, with population size and retail structure, means the industry is far more export focussed than the mainland with consequent less exposure to the market power of major retailers.

Tasmania is also mid-development in terms of infrastructure, and even compared to mainland Australia, has some way to come in getting milk from udder to glass. This issue has been aided by recent investment of $14m from Devondale Murray Goulburn in Edith Creek, Tasmania.

And if Kiwis don’t want to buy farms, McCarty says there is also strong demand for farm managers and shareholders in Tasmanian dairy.

Nicole Franklin - Corporate Communications at ANZ, coordinating the ANZ insight series.  

Danielle Entwistle - Associate Director Agri Research ANZ.

Photographer: Taras Vyshnya

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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