Dairy stars but other exports play part

By Jamie Gray

The dairy herd topped six million head of cattle for the first time this year. Photo / File
The dairy herd topped six million head of cattle for the first time this year. Photo / File

It's been another great year for dairy and several other commodities aren't doing too badly either.

To have commodity prices moving in the same direction is rare but sheep meat, beef, wool and log prices have done well this year.

Statistics New Zealand data shows that in 2011, the dairy herd topped six million head of cattle for the first time.

The herd has doubled in size since 1982. In that year, dairy exports of milk powder, butter, cheese and casein represented 19 per cent of merchandise exports.

Today the proportion is 27 per cent, so dairy remains the undisputed king of the export industry.

"I can't see that changing," said ASB Bank rural economist James Shortall. "But there have been some other really good stories out there for commodities."

Farmers had enjoyed a commodities price surge similar to that of 2008, which benefited just dairy and beef.

"This time around it is a lot more broad-based," Shortall said.

"So despite the turmoil that we have seen around the world, agriculture and farming are probably enjoying some of their best ever prices."

The challenges facing the economies of the countries New Zealand exports to have taken some of the gloss off revenue expectations for the agriculture, forestry and seafood sectors, according to a Ministry of Agriculture and Forestry report.

All commodities markets face stiff headwinds in the form of the strong New Zealand dollar but MAF said the primary sector was still on target for record export income.

The ministry expects dairy to bring in a record $13.6 billion in the year to June 2012, thanks in part to favourable spring growing conditions.

In general, MAF expects overall pastoral production for the 2011-12 season to be above average.

Prices for pastoral agriculture and seafood had generally remained at historically high levels over the past half-year, despite the deteriorating global economy and high exchange rates, MAF said.

Strong demand from China and the rest of Asia are common themes running through many of the commodities stories this year.

For forestry, an industry that was once in decline, a turnaround in prices has been a godsend.

"The good news is that we are now in pretty positive territory," said Forest Owners Association president Peter Berg.

"Over the last couple of years deforestation has essentially stopped and new plantings have started to build again," he said.

"We are cycling back in the right direction and I think that is partly a reflection of the markets being good and partly due to the emissions trading scheme."

Log prices surged in April-May but have tailed off since then, reflecting tough conditions in the domestic and offshore construction industry.

According to NZX Agrifax, logs are trading at $77 a tonne, still more than their long-term average but down from $97 a tonne in April.

Statistics NZ data for the year to March showed new area planted in forest was 7100ha, a 4200ha improvement from the previous year.

But it's not all good news for forestry, because timber exports dropped away sharply in the September quarter, thanks to weak demand in the United States and domestic housing markets.

Wool has gone from being little more than a cost recovery nuisance for farmers to a genuine earner, which has helped change the mindset for this once highly-valued commodity.

Prices for 35 micron fleece have gone up by 29.7 per cent over the last year, despite ructions on world markets and the strong New Zealand dollar. Since 2009, wool prices have doubled.

Cotton prices have taken a hammering over the last six months and the fear is that this trend might spread to wool. So far, prices have held firm.

Wool export revenue is expected to increase by 19 per cent to $848 million in the year ended June 30, 2012, because of higher prices, according to MAF.

Then there is lamb. The lamb schedule price for the year to September 2011 was the highest in inflation-adjusted terms since 1977, through reduced supply on local markets. Lamb hit $8kg a few weeks back, up from $6.10 a kg this time last year and $3 a kg in 2007.

Export lamb export revenue is expected to increase by 9 per cent to $2.76 billion in the year to June 2012. The lamb crop for spring 2011 is expected to be up by 7 per cent on last year's.

Beef prices are up 16 per cent on last year. This market, which is sensitive to the US beef market, has been hard hit by the strong New Zealand dollar against the US dollar. NZ beef production is expected to increase 2.4 per cent in the year to June 2012.

Elsewhere in the primary sector, the MAF report shows "wild capture" fisheries production was up 2.4 per cent to 442,000 tonnes in the year to September 30.

Production was up due to increases in the total allowable catch for hoki.

But it's not all rosy on the commodities scene. The kiwifruit industry has been hit hard by the virulent Psa infection and loss of vines since November 2010 could take production of gold kiwifruit from 30 million trays in 2011 to 20 or even 10 million trays in the 2012 season.

Big earners

6m
Size of New Zealand dairy herd

$13.6b
Expected revenue for dairy, year to June 2012

$4.26b
Expected revenue for forestry

$848m
Expected revenue for wool

- APNZ

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