Jamie Gray is a business reporter for the NZ Herald

Rosy glow in the primary sector

New Zealand's biggest export - dairy - continues to suffer from oversupply and soft demand but other parts of the primary sector are booming. Photo / Warren Buckland
New Zealand's biggest export - dairy - continues to suffer from oversupply and soft demand but other parts of the primary sector are booming. Photo / Warren Buckland

New Zealand's biggest export - dairy - continues to suffer from oversupply and soft demand but other parts of the primary sector are booming.

In the meat trade - the second biggest primary export - beef prices have been firm.

Kiwifruit - building on a series of strong post-Psa years - is set to have another season of very strong growth and the same can be said for the apple trade.

Likewise the wine sector - again following a string of successful years - is on the verge of another strong season as the harvest draws to a close.

Underpinning the primary sector is the weaker New Zealand dollar. While it remains higher than most exporters would prefer, it is still US10c down from this time last year. In addition, growing conditions have been generally favourable for the primary sector after an expected El Nino-related drought failed to materialise.

For the moment, it seems that farmers will have to endure a milk price that is well below the average cost of production, but some analysts expect the pain to be relatively short-lived as producers start to cut back on output and supply slips back into alignment with demand, possibly by the end of this year.

Rob Davison, Beef and Lamb New Zealand's executive director, said the international price of beef had fallen compared with this time last year, but the decline in the Kiwi dollar had helped. The lamb trade was, however, lacking by comparison.

In the beef trade, supply was expected to tighten as Australia looks to rebuild stocks after a drought-induced cull. "We are calling it pretty reasonable - particularly for beef - but everyone is looking for lamb prices to improve," he said.

Apple growers had a late start to the season which meant the harvest has been compressed into a shorter time span. "We are flat out," said Gary Jones, business development manager at Pipfruit NZ. "There has never been as much pressure to get the crop off as there is at the moment."

The crop had a high "packout" rate - meaning a high percentage of apples per bin were export quality.

"There is a high packout rate but the second part is that there is strong demand in all our markets," he said. "There are record volumes going through the ports," he said.

As it stands, the Ministry for Primary Industries' 2012 challenge to the primary sector to double exports by 2025 will be achieved just four years after the challenge was issued, he said. "The industry has gone from being a significant one to one that is much, much bigger," Jones said.

Philip Gregan, chief executive of New Zealand Winegrowers, said the grape harvest, which finishes at the end of this month, was looking at a significant improvement on last year's grape harvest of 326,000 tonnes.

There had been good growing conditions in Marlborough - where most of the main export - sauvignon blanc - is grown. He said the smaller wineries around the country have enjoyed a boost from strong growth in the tourism sector.

Gregan said quality was looking good and the wine sector, which has the United States as its biggest export destination, had been a big beneficiary of the NZ dollar's decline against the greenback, with returns on packaged goods going into the states up 13 per cent on last year.

The $2 billion-a-year kiwifruit industry is looking at another record crop for green and gold varieties, Zespri chief operating officer Simon Limmer said.

"There is significant growth and strong demand," he said. "The mood is very positive within the industry and for both green and gold growers ... and the markets are performing very well," he said.

- NZ Herald

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