MAF forecast shows primary sectors riding the recovery

15 June 2010

New Zealand's primary producers have picked up where they left off pre-recession, with most in the pastoral, horticulture and arable sectors expected to see improved or steady conditions, a Ministry of Agriculture and Forestry report shows.

The annual Situation and Outlook for New Zealand Agriculture and Forestry (SONZAF) shows New Zealand's beef, lamb, wool, wine, kiwifruit and forestry industries all projected to receive higher prices over the coming four to five years.

"After drought in the North Island left dairy production flat in 2010, MAF expects production to rebound in 2011 and grow on the back of ongoing increases in herd numbers."

MAF Director-General Murray Sherwin says China's growth at a time of global contraction has been a major feature of the primary sector recovery.

"China dramatically increased its purchases of agricultural and forestry products from New Zealand for the year ended December 2009. Earnings from primary product exports to China rose 49 percent, to $2.19 billion, with dairy and forestry the big contributors.

"Most of our other trading partners have returned to growth as well, while the demand associated with growing incomes in key developing economies is ensuring conditions for food exporters have been buoyant.

"As usual, however, considerable uncertainties hang over the outlook. Dairy product prices, in particular, have become very volatile over the past few years. Rapid price shifts, either up or down, cannot be ruled out.

"While the overall international economic outlook is rather more positive now than was the case when MAF's last projections were undertaken, sovereign debt accumulations in a number of developed economies look set to pose risks for the global economy for some time to come.

"All in all, our exporters can afford to be optimistic about the medium-term picture, but short term fluctuations in conditions are inevitable."

SONZAF 2010 also includes an overview of government and industry efforts to marry efficiency gains with environmental improvements, and investigates the value and potential issues in establishing and expanding irrigation and water infrastructure.

For more information, go to: http://www.maf.govt.nz/mafnet/rural-nz/statistics-and-forecasts/sonzaf/2010/2010-sonzaf.pdf

Contact: Iain Butler, Senior Communications Adviser
(04) 894 9471; 029 894 0471
Iain.butler@maf.govt.nz

SONZAF 2010 highlights:

Dairy

The outlook for New Zealand's dairy sector is looking positive, with some recent gains in prices and a 4 percent increase in dairy cattle numbers recorded at June 2009.

New Zealand production of milk solids is forecast to increase by 14 percent in the year to 31 May 2011.

Spot market prices for butter, skim milk powder, whole milk powder, and cheese all peaked in December 2009. This was partly due to completion of inventory rebuilding and partly to the overhang influence of publicly held stocks. FOB prices are expected to start declining in the three months to 31 December 2010.

Lamb

International lamb prices have been strong, thanks to a reduced world supply of lamb and stable demand; the weak pound hit returns to New Zealand farmers however.

New Zealand's sheep production is still falling in the aftermath of the drought in 2008. As at 30 June 2009, total sheep numbers were 32.4 million head, down 5 percent on the year before. However, with fewer ewes on farms, lambing was good in spring 2009, with lamb numbers up 6.6 percent on the previous year.

Wool

International prices for fine wool have risen steadily since spring 2009. Strong wool exports depend on carpet and home textile markets overseas, which are still weak in the wake of the global economic crisis.

Beef

Demand for prime beef contracted in many countries during the recession as consumers traded down to cheaper alternatives. In contrast, prices for New Zealand manufacturing beef in the US have picked up with good demand for cheaper products like hamburger patties.

Wine

New Zealand wine production has increased dramatically over the past decade, culminating in record vintages of 285 000 tonnes in both 2008 and 2009. This increase in production, combined with ongoing recessionary conditions in the historically lucrative UK and US markets, has seen prices for New Zealand’s branded wine fall.

Kiwifruit

New Zealand kiwifruit export returns reached $1 billion, for the first time, for the year ended 31 March 2010. Overall export prices rose by 11 percent, to above $10 per tray, in the year ended 31 March 2010, driven by strong market demand for gold kiwifruit.

Logs

Export volumes are currently averaging 2.2 to 2.5 million cubic metres a quarter, with over half this volume destined for China. Last year saw a dramatic 79 percent increase in the volume of timber exports to China, making it now the largest importer of New Zealand timber in volume terms. In value terms, however, China still lags behind the US and Australia.

Deer

The outlook for the New Zealand deer industry is positive. Prices are expected to stay high while supplies remain low. After five years of contraction, New Zealand deer herds are forecast to stabilise.

  

 

Last Updated: 22 September 2010

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