Export returns tipped to fall

By JIM EAGLES

New Zealand's earnings from exports of pastoral, horticultural and forestry products is forecast to fall by almost $1 billion this year and a further $250 million next year.

After that, however, prices and volumes are expected to recover sharply, with export income reaching new heights in 2005 and 2006.

Those predictions come in the Ministry of Agriculture and Forestry's latest forecasting report - Situation and Outlook for New Zealand Agriculture and Forestry - released this morning.

The report says total export earnings from land-based primary industries (see table) rose by 11 per cent in the year to the end of March this year (to $19.7 billion), but are expected to decline 5 per cent in the current year and a further 1 per cent the following year (reaching $18.5 billion), before rising 6 per cent in 2005 and 4 per cent in 2006 (to $20.4 billion).

Assistant director-general for policy, Paul Reynolds, said that last year's returns were exceptional because of a relatively weak New Zealand dollar and good climatic conditions.

Prices for most commodities have already declined from that peak - exacerbated by the appreciation of the kiwi - and that trend is expected to continue for the next 18 months or so.

The fall in export returns is predicted to be most noticeable in pastoral products (expected to drop 5.7 per cent in the current year), especially meat, but dairy and wool will continue to do quite well.

Horticulture exports are expected to decline rather less (down 3.2 per cent) due mainly to a sharp increase in the volume of wine.

Forestry is forecast to have only a small downturn (1.6 per cent) due mainly to rising sales of logs and lumber.

"But a recovery is in the wind ... due predominantly to increasing volumes," said Reynolds.

The recovery is likely to be strongly driven by forestry exports (expected to jump by 9.6 per cent in 2005) and horticultural exports (up 8.5 per cent).

Export earnings from pastoral products are predicted to rise more modestly (up by 4.8 per cent), driven mainly by strong dairy sales.

The report's predictions for the main sectors are:

* Dairy exports are expected to rise by 5 per cent from now until 2006 (reaching $7.9 billion). Volumes are predicted to rise strongly with prices expected to fall both next year and in 2004 and then to recover slowly.

* Meat exports are predicted to decline by 16 per cent (to $3.8 billion) over the four-year period covered in the forecast. Falling sheep and cattle numbers are expected to be offset by rising venison production.

* Horticultural exports are predicted to be up 16 per cent by the end of the 2006 March year (to $2.4 billion), mainly due to dramatically increasing volumes of wine.

* Forestry exports are expected to be up by 17 per cent over the four-year period (to $4.3 billion). Log and lumber prices should improve from about 2004, but extra income is likely to be driven mainly by rising volumes.

* Exports of pulp and paper "look set for steady but unspectacular growth" over the next four years.