Ibus 201 - New Zealand Dairy Industry in a Globalized World

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School of Marketing and International Business

IBUS 201 Individual Assignment Cover Sheet

New Zealand Dairy Industry in a Globalized World

Abstract:

Under the impact of globalization, the booming development of dairy industry in New Zealand is the top-level dairy exporter. The patterns sometimes changed in NZ dairy during globalization process. Globalization brings many benefits but there are still exist unavoidable challenges and difficulties such as more output and profits, to promote economic growth but also imbalance in supply and demand, price fluctuation, quality problem and other country competitors. Fonterra is such a representative example and reflect them and also involves recommendations in the text. So consequently, it is an interaction effect between globalization and NZ dairy.

Name: Hanyu Li      

Student ID: 300347238

Course Coordinator: Dr. Yang Yu

Word Count: 1511

Date Submitted: 16/01/2015

“Globalization refers to the shift toward a more integrated and interdependent world economy” (Hill, 2011, p.6). From the dairy website, it shows “global demand for dairy is continuing to grow. In particular, population growth, rising incomes, urbanization and westernization of diets, in developing countries such as China and India, are leading to increased demand. In developed countries, where consumption is already high, there is a more consistent outlook, with demand expected to remain stable” (The global dairy industry, n.d.). Under the impact of globalization, “it is the world's top dairy exporter and accounts for a third of the world's dairy trade. Dairy contributes 25 percent to New Zealand's merchandise export earnings” (Dairy, n.d.). The largest exporter of dairy commodities in the world is New Zealand, which representing about one third of international dairy trade almost every year (The New Zealand Dairy Industry, 2010).

The background of dairy industry in New Zealand is that “dairy is the backbone of New Zealand's food and beverage industry. New Zealand is unique in that it exports 95 per cent of the 19 million tonnes of milk produced by New Zealand farmers”. It on behalf of a quarter of all New Zealand commodity export. “The industry is one of New Zealand's largest and best example of a vertically integrated, co-ordinated global supplier industry. The dominant players are Fonterra, Tatua and Westland” (Dairy, n.d.).

The changing patterns happened during these years. According to the article from website, a recent survey of dairy industry indicates that in 2007, the situation of dairy commodities is changed. “Increased demand for dairy products out-paced global production, leading to higher milk prices. Although fluctuating global dairy production has meant increased price volatility, albeit at higher milk price levels. However, since April 2014, powder prices declined sharply due to increased production in key exporting countries such as the New Zealand, some demand offset following very high prices. Only 7 percent of global milk production is traded each year, of which New Zealand accounts for one-third of the export volume. This means the bulk of dairy product is consumed in the country or market it is produced and a good amount is milk. New Zealand’s favorable pasture growing conditions increased production by 10 percent for the year ending May 2014” (Global production and price volatility, 2014). “2010-2011 was a record year for dairy in New Zealand. Highlights included total number of New Zealand dairy cows was increased by 132,000 to just over 4.5 million cows, which had an increase of 3 percent over the 2009-2010 season. Average production per cow increased 5 percent. Milk processed by New Zealand dairy companies, 17.3 billion litres, with the total milksolids processed increasing from 1.44 billion kilograms in 2009-2010 to 1.51 billion kilograms” (The New Zealand Dairy Industry, 2010). Also, here is another trend in NZ dairy under globalization. From 2012 to 2014, NZ milk production had an obvious fluctuations. The actual data from the Internet shows the total production from about 19,000 tonnes to 20,500 tonnes during 2012 and 2013. But in January 2013,when it got to the peak at 20,500 then decreased significantly to 19,500 in July 2013. Then the period from July 2013 to October 2014 had an upward trend in the amount of tonnes from 19,500 to 21,668. So we could bold prediction that the total tonnes in NZ dairy will never has a maximum, it will continuous rise during next years (Global dairy going up, 2014).