Dip in primary exports tipped

Rising Asian demand for red meat was putting pressure on a contracting global supply, said the Ministry of Primary Industries. Photo / APN

Ministry for Primary Industries forecasts small drop in returns in 2014/15 followed by rise.

The value of primary exports will fall from unusually high levels over the 2014/15 year before recovering steadily in the following three years, the Ministry for Primary Industries says.

In the past year, growing demand in China for food fuelled a sharp rise in New Zealand export returns, which brought into focus the importance of the People's Republic as a trading partner, the ministry said.

In its latest Situation and Outlook for Primary Industries, it said 2013/14 was a standout year for dairy and forestry in terms of both price and production.

Over the outlook period to 2018, primary sector income was expected to fall initially on the back of a forecast reduction in milk solids payments, but then rise as dairy continued to expand, productivity increased for sheepmeat, and the exchange rate depreciated, the ministry said.

Export returns from the primary sector were estimated to have hit $37.7 billion in 2013/14 but were forecast to fall to $35.8 billion in 2014/15, rising steadily over the next three years to hit $40.8 billion in 2017/18.

Dairy now accounts for 46 per cent of total primary industries export value and 35 per cent of total New Zealand merchandise export value, according to the ministry. High prices for dairy in 2013/14 were supported by other products such as logs, meat and aquaculture but were partly offset by a higher dollar.

KPMG released its annual Agribusiness Agenda yesterday - see here for an interview with its author, Ian Proudfoot:

Looking ahead, the ministry said international dairy prices were forecast to retreat to more sustainable levels in the coming year with a 16 per cent reduction in the milk forecast price to $7.20 a kg of milksolids - still well ahead of the 10-year average of $5.90 a kg.

Lower prices and higher production meant dairy exports were forecast to decline 10.2 per cent to $15.8 billion for the year ending June 2015. The ministry said it expected dairy's contribution to steadily improve, reaching $18.4 billion in export value by the 2017/18 year.

The ministry said global economic activity strengthened in the second half of 2013 and was expected to improve in 2014 and 2015. However, an easing in growth was expected in China in 2014 and 2015 because of a rebalancing of consumption from low to higher-value commodities and an easing in infrastructure investment.

See the full Ministry for Primary Industries report here:

Meat and wool
Total meat and wool export value for the year to June 2015 was estimated to increase by 1.8 per cent to $8.2 billion and was projected to reach $9.4 billion by 2018, reflecting an increase in prices mainly for beef and lamb products.

Rising Asian demand for red meat was putting pressure on a contracting global supply, the ministry said.

"Domestically, dairy farming expansion continued to be a threat to the meat industry, but productivity improvements in lambs born per ewe and average carcass weights of slaughtered animals are projected to offset static to declining herd and flock numbers."

Forestry
Very strong log prices in the year to June 2014 were supported by record log production. "But a global production response to the higher prices will be felt in the coming year, particularly in China where demand growth is expectedto slow," the ministry said.

Forestry export value for year ending June 2015 was forecast at $4.7 billion, down 8.5 per cent on this year due mainly to lower log prices. By 2018, export value is projected at $5.0 billion, reflecting increased log volume, lower log prices and higher prices for other forest products.

Horticulture
Horticulture's export value was forecast to increase 5.2 per cent to $3.83 billion in the year ending June 2015. Exports would be boosted by a record harvest of wine in 2014thanks to warm conditions around bud initiation and flowering.

Kiwifruit export volumes were said to have reached a turning point because of the containment of the bacterial disease Psa and the prospects for apple exports are good as new varieties come on stream.

Horticulture export revenues were forecast to surpass $4 billion in 2016, a major milestone for the sector.

Seafood
New Zealand's top three seafood export earners are rock lobster, hoki and mussels, accounting for more than 40 per cent of total seafood exports.

Total seafood export value for the year ending June 2015 was forecast at $1.44 billion, slightly down on the current year, but is projected to reach $1.64 billion by 2018.