Government agrees to major changes for dairy export quota allocation system

Agriculture Minister Damien O’Connor says the improved system will open quota allocation access to a wider group of exporters.

New Zealand’s promising dairy sheep and goat sectors will qualify for dairy export quota access for the first time after a government review of a system considered no longer fit for purpose, following a string of new free-trade agreements.

Agriculture Minister Damien O’Connor said the improved system, which requires changes to the Dairy Industry Restructuring Act (DIRA), will open quota allocation access to a wider group of dairy product exporters than the traditional cow milk traders.

Quota allocations are based on each dairy company’s share of milk solids collected from farmers. It excludes businesses that don’t collect milk solids but may still want to export products into quota markets.

Moving away from the “prohibitive” milk solids model would also open up quota access for non-bovine dairy exports, such as sheep and goat milk products, he said.

The improved system would help boost New Zealand’s $26 billion dairy export industry.

O’Connor said after signing seven new or upgraded FTAs since 2017, New Zealand had several new dairy quotas, including with the UK and the European Union.

This had prompted a review of the quota system, introduced in 2007 with allocations set annually by the Ministry for Primary Industries.

The review found the system was no longer fit for purpose, O’Connor said.

New Zealand allocates quota for bovine dairy exports to the US, the UK, the European Union, Japan and the Dominican Republic.

Cabinet had agreed to progress amendments to DIRA, O’Connor said. The soonest changes could be in place would be late next year, meaning the 2025 dairy export quota allocation round could be made under the new system.

The new system would change the basis of quota allocation from milk solids collected to export history, and create a new regulation-making power to enable portions of individual quotas to be reserved for both dairy exporters ineligible for quota and those eligible for only low export volumes.

It would enable quota access for non-bovine animal dairy exporters, such as sheep and goat dairy product exporters, on the same basis as bovine animal dairy exporters.

New Zealand’s growing sheep milk export industry is tipped to have the potential to be a $750 million earner by 2035.

Under the new system, allocation of each quota to applicants would be made proportional to their share of New Zealand’s exports by volume of the relevant product to all markets, including non-quota markets.

The existing requirement to collect a minimum of 0.1 per cent of total milk solids collected from dairy farmers in New Zealand would be removed.

Any quota that would not be fully allocated during an allocation round (for example, due to under-application) would continue to be allocated pro rata to eligible applicants.

Quotas would continue to be allocated annually, in advance of the beginning of the quota year.