File Photo / Rowena Duncum
Following a strong production season and renewed surge in dairy and meat prices, primary industry export performance continues to outpace expectations for the year ending June 2019.
The Ministry for Primary Industries' latest Situation and Outlook for Primary Industries report showed export revenue for that period was now forecast to reach $45.6 billion - 6.9 per cent higher than the previous year, and 3 per cent higher than MPI's December forecasts.
Excellent growing conditions across most of the country had increased production estimates, particularly for dairy, sheep and beef, and kiwifruit.
Import demand from China continued to strengthen for most primary industry products, even as some indicators showed weakness in the Chinese economy and the tariff dispute between the United States and China continued to hang over international trade flows.
Strong or rising prices continued to be maintained across most sectors as a weaker New Zealand dollar further boosted export returns.
The dairy sector's outlook had brightened due to strong production growth which was now estimated to be 3.7 per cent higher than last year.
That had been accompanied by a recovery in prices, as production growth expectations stalled in other exporting regions and the EU had sold down its skim milk powder stocks, which had weighed on markets over the past few years.
Dairy export revenue was forecast to lift 5.5 per cent to $17.6 billion for the year ending June 2019.
The volatility in commodity prices experienced over the current dairy season underlined an increasingly uncertain outlook for New Zealand's dairy export revenues.
There was down side risk to dairy prices if China's economy was damaged by any further escalation in the US-China trade dispute.
Similarly, a return to growth in milk supply in the northern hemisphere could once again place downward pressure on export prices, should market imbalances recur.
Great pasture conditions this spring and summer had benefited the red meat sector, with positive lambing percentages and above-average slaughter weights this season.
Red meat prices had continued to exceed expectations. Lamb was the "standout", on track for average export prices to exceed last year's record prices by 5 per cent.
Meat and wool export revenues were forecast to increase to $10.1 billion for the year ending June 2019, up 6 per cent from last year.
The main driver was high prices which were being driven by strong international demand, especially from China, and supply constraints in Australia, due to drought and a recent flood.
Wool exports were forecast to increase 0.7 per cent to $550 million in the year ending June 2019.
That increase was being driven by marginally higher wool prices, especially in low and mid-micron levels.
Strong wool export prices had continued to hover around $4kg for most of the past year. In contrast, fine wool export prices had remained at near-record prices, around $22kg, over the same period.
China now accounted for 27 per cent of New Zealand's total meat and wool exports. In the past six years, New Zealand's exports had shifted away from the UK and towards China, the rising protein consumption lifting the imports of all meat and poultry.
Forestry revenue was forecast to reach $6.8billion, an increase of 7 per cent from 2018, based on strong growth in log export volumes.
Much of that growth had come from increased Chinese demand for New Zealand logs, supporting both robust prices and near-record export volumes.
Demand was expected to remain steady over the next year and Chinese residential construction was expected to increase, despite a weakening Chinese economy.
Harvest volumes reached near-record levels in the December 2018 quarter and prices remained steady at more than $200 per cubic metre.
Horticulture revenue was forecast to rise 15.7 per cent to $6.2 billion, driven by increases in kiwifruit, apple and wine exports.
Kiwifruit exports were expected to rise by 33.3 per cent due to increases in both volumes and prices. Volume increases were being driven by both increasing yields and expansion in planted area.
The 2018-19 cherry season in Central Otago was limited by poor weather, particularly with heavy rain just before harvest.
That was expected to limit export volume to under 3000 tonnes, down from more than 4000 tonnes in 2017-18 and lower export revenue from $84 million to under $70 million.
Wine export revenue was expected to increase by 3.9 per cent and apple and pear revenue was expected to increase by 11.5 per cent.
Export revenue from seafood was expected to rise 5.8 per cent to $1.8 billion, while arable exports were expected to fall 3.2 per cent to $235 million as the impacts of the poor 2018 season were partially offset by an expected increase in export volumes from the 2019 harvest.
Strong pasture growth in the dairy sector had weakened demand for supplementary feed, leading to a softening in grain prices and lower palm kernel expeller.
Looking out to 2020, primary sector export revenue was forecast to fall slightly to $45.3 billion.
Dairy production and export volumes were expected to fall following the current year's excellent run of weather, and meat and log prices were expected to soften slightly but remain near the current historic highs.
Slowing global economic indicators, rising protectionist sentiment, and outbreaks of African swine fever (ASF) in China and Europe were yet to have a direct impact on New Zealand's primary industry exports.
However, those issues provided an increasingly uncertain backdrop to the otherwise positive outlook.
Trade tensions between the US and China, the world's two largest economies, and the UK's separation from the EU, represented the greatest risk factors for international trade and global economic growth.
ASF outbreaks were looming over global protein markets and presented a significant risk to the New Zealand pork industry.
There was no treatment or vaccine for the disease which continued to spread in key provinces of China where half the world's swine population resided.
For New Zealand, all those factors were counterbalanced by increased opportunities associated with the Comprehensive and Progressive Trans Pacific Partnership.
Will this be Simon Dallow's swansong year as the 6pm newsreader?