Call for Outward Looking Focus in Volatile Markets

UK - The European market needs to be more open to mitigate price volatility.
calendar icon 1 July 2015
clock icon 5 minute read

Speaking at the annual Dairy UK dinner in London, the New Zealand High Commissioner Sir Lockwood Smith said that New Zealand is committed to negotiating a free trade agreement with the EU because of the potential that it holds.

He said that a free trade agreement will make the prospect of investment both ways far more attractive, because free trade agreements open up markets.

“But free trade agreements do not only open markets, they also open minds,” Sir Lockwood said.

Sir Lockwood Smith told the UK Dairy industry that free trade agreements open minds as well as markets

He said that the developing markets offer a great potential for trade and at present China takes about 36 per cent of New Zealand’s dairy exports.

Before the UK joined the European Economic Community in 1973 it used to take more than 50 per cent of New Zealand’s dairy exports. Now it takes less than half a per cent.

Sir Lockwood added: “One of the most fundamental lessons the New Zealand industry has learned over the last 40 years is that an outward focus and market diversification are critical to success in a volatile world.

“Global dairy demand is set to rise dramatically in the coming years, bringing new opportunities for dairy producers and processors to work together.

“In fact, the changing nature of the value chains means that synergies available from joint investment strategies will lead to far greater success than going it alone.”

He said that New Zealand produces less than three per cent of the global dairy market, but the nature of the market is changing.

The large companies such as Fonterra export large quantities of milk and dairy products from the EU and other countries as well as New Zealand.

He said that New Zealand has not got the capacity to increase production to meet the rising export demand.

And he added that despite the Russian ban on imports and a reduced demand from China, these are only temporary problems and the market will grow again.

“Volatility in now the new norm,” Sir Lockwood said.

“You need an outward focus in a volatile world.”

"Volatility is here to stay, so we had better get used to it"
Jim Nicholson, Northern Irish MEP

UK Dairy president, Billy Keane, who is approaching the end of his two year term of office said that the UK dairy industry needs to hold on to its confidence and take advantage of future opportunities to grow.

“We are all acutely aware that the last twelve months have brought their share of uncertainty,” said Mr Keane.

“However, we must be confident in the long-term future of our dairy industry.

“We know that the fundamentals of the market are right and that our industry has unique prospects and a bright future ahead. We embrace the challenges wholeheartedly and I have every confidence that we will be able to seize opportunities to further the interests of our great industry. Now is our chance to get in the game and become the global player we’re expected to be.”

Mr Keane said that capital expenditure by Dairy UK members has reached almost £1.3 billion within the last decade, showing the dedication and drive of dairy companies to develop a successful and strong dairy industry in the UK.

He added that the industry led the way in terms of environmental stewardship and has achieved a 15 per cent improvement in energy efficiency since 2008, surpassing official targets five years ahead of schedule.

The UK industry has also developed new tools to guarantee the highest and most robust standards of food safety and Dairy UK has engaged in a series of proactive partnerships, which have been important in launching initiatives such as the Johne’s Plan and to further research and promote milk and dairy.

The Dairy All-Party Parliamentary Group has given the industry a platform to communicate more effectively with Government and parliamentarians, he said, addressing common misconceptions about dairy.

Dairy UK CEO Dr Judith Bryans said that the industry group will be writing to every elected politician to spell out the nutrition and health benefits of dairy products in a bid to gain the backing of the parliamentarians.

“One of our key priorities remains creating an environment in which our dynamic dairy industry can thrive and ensuring there is ample recognition for how good our products taste, how safe they are and how they make a difference to the nation’s diet.

“We want to bring public health and the role of dairy right back to the top of the agenda and address how dietary policies, whether developed in the UK or in Brussels, affect the dairy industry and the consumer. In the next few weeks every MP, MSP, AM and MEP will receive a copy of our latest report which will deliver the facts on dairy and health to their doorsteps.”

Agriculture minister George Eustice, told the audience of politicians, and dairy industry executives that he felt the prospects for the sector were good with a forecast two and a half per cent growth.

He said that the food industry is the largest earner in the UK and he called for greater impetus in improving skills within the dairy industry, incorporating new technology and improving exports.

Mr Eustice said that the UK government wants to see a threefold increase in the number of apprenticeships in the food and farming sector to boost careers in the industry.

He said that the government recognised the difficulties being faced by dairy farmers over price but he said that action over tax averaging to alleviate the immediate burden, pressure for country of origin labelling to help promote dairy products in export markets, grants for rural development programmes for the dairy sector and encouragement for dairy organisations to work together will all help the dairy producers in the long term.

He added that there is also a need to mitigate risk by developing a US style futures market for the dairy sector.

He also called on the UK retailers to abide by the grocery adjudicator’s code of conduct to ensure a fair market for producers.

Northern Irish Member of the European Parliament, Jim Nicholson, receiving the Dairy UK annual award, said that volatility in the market was now a factor that had to be accepted.

“Volatility is here to stay, so we had better get used to it and we had better learn how to handle it,” Mr Nicholson said.

“Quotas have gone, so let’s get on with it. We live in a new world now.

“The challenge for the future is not for the Southern Hemisphere to be setting the price target but that Europe should be setting the target.”

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