Dollar dominates for agribusiness

John Key's relationship with China is seen as a plus by agricultural leaders.

Primary sector leaders are looking ahead positively this year, with China the bedrock of optimism for many

The effect of the high and volatile New Zealand dollar on exports dominated primary sector bosses concerns in the latest Mood of the Boardroom survey.

Forty per cent of those surveyed classed the dollar as the biggest domestic economic headwind faced by their industries, followed by wage increases, insurance costs and regulation.

Ideas to tame the Kiwi beyond the Government's preferred method of keeping a tight rein on the deficit were surprisingly thin on the ground given the number of complaints. Radical interventions in the currency markets touted by Opposition parties got short shrift from primary sector executives.

The response of meat exporter Anzco chairman Sir Graeme Harrison was typical: "It is impossible for a small economy like New Zealand to sensibly intervene. It simply can't bet against the market. That is all there is to it."

Luckily the high dollar is coinciding with either very good returns or the expectation of a recovery in prices for most industries.

More than half of primary sector chief executives surveyed were slightly more optimistic about the outlook for their industries in the year ahead. More than a quarter classed themselves as being much more optimistic.

China seems to be the bedrock of a good deal of that optimism. Two thirds of executives said its demand for commodities represented a great opportunity for their companies. All said they had strategies to crack the Chinese market.

Two chief executives spoken to by the Herald in follow-up interviews said they expected China to become their industries' top export market within five years.

The Ministry of Primary Industries' recent 2013 Situation and Outlook reported nine export product categories are already there.

But increasing dependence on China is also causing unease among some agribusiness top brass, including Silver Fern Farms' chief executive, Keith Cooper. "We need to ensure that we do not create concentration risk on specific markets."

Cooper said the recent meat certification fiasco underlined the risks in shifting away from traditional markets in Europe to new ones with different cultures and business norms not yet well understood by New Zealand companies and officials

Zespri's chief executive Lain Jager expects China to be the kiwifruit marketer's single biggest market within five years, from number three now. He agrees that poses some risks but believes they are manageable. "We would be quite careful to be not overexposed into any one market but that is not difficult for us because we are supplying into 60 markets around the world."

Primary sector bosses by and large are happy with the way the Government is handling the relationship with China.

Anzco's Graeme Harrison says the Prime Minister's meeting with the new leadership in Beijing in April helped break a deadlock over meat plant certification which was blocking exports despite the existence of the free trade deal.

"I have no doubt now that China will challenge the United States as New Zealand's largest beef market in the next five years."