The economic implications of climate‐induced variations in milk production

Abstract

Deviations from normal in New Zealand's annual milk production, caused by major climatic variations, have a direct impact on the country's economy. This study shows that the key climatic variables that positively and negatively affect milk production are rainfall, days of soil moisture deficit, and growing degree days. Production in eastern regions and Southland is also affected by the previous year's production, indicating that the effects of “good” or “bad” years can propagate into the following year. The largest negative deviation in milk production in the last 30 years, approximately 10% nationally, was in 1998/99, a La Niña year. However, climatic effects caused by the El Niño Southern Oscillation phenomenon in isolation are shown not to consistently impact on national milk production. Economic model runs using several scenarios of drought‐induced reductions in national milk production of the order of 10% show impacts on private consumption and GDP of between 0.3 and 0.5%. Doubling the reduction in milk production leads to non‐linear economic impacts, with private consumption falling by 1.2% and GDP falling by 1.1%.

Keywords:

• climate variability
• drought
• milk production
• economic impacts
• private consumption
• GDP