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Rabobank's Melbourne-based Head of Research, Tim Hunt spoke to The Country's Jamie Mackay about a recent client webinar, where he looked at the implications of Covid-19 on New Zealand's dairy, red meat and horticulture sectors.
"With dairy we're still primarily exposed to the demand shock of this. We hear a lot about China improving, but Chinese food service sales for example are still down 30 per cent year-on-year in April".
"So the demand market for dairy's pretty weak. Prices have come off a fair way - what's keeping us from going down further at the moment is the amount of government intervention going on in Europe and the US in particular - buying a lot of product that would have hit New Zealand's markets at very cheap prices".
"So that's been a godsend and kept prices from falling further, but we're still settling into weak markets and we still think there could be some downside to come."
Rabobank's $5.60 forecast milk price for next season:
"That's still where we see the market, we don't see a lot of downside from that, unless we start to see second-round infections in China in particular and [in the] US and Western Europe - that would be the key caveat to that".
"Red meat's been one of the winners out of this very complex picture but really, there have been demand shocks, again at that 30 per cent year-on-year decline in food service in China - that's the key market into which mutton, lamb and New Zealand beef is sold into".
"Because of [African] Swine Fever, which we think will lead to about another 10 per cent reduction in pork in China this year, the protein market there is tight".
"[Also] at times we've seen more that 30 per cent of US meat processing capacity go down, and we've seen prices for imported lean beef into the US - actually at the moment - at 10 per cent higher than they were prior to the crisis in New Zealand dollar terms".
"Now we've got processing plants up and running at close to full capacity, clearing that backlog of livestock. Really New Zealand is placed pretty well in red meat to enjoy a decent season".
Horticulture - Kiwifruit
"It is a remarkable story that the industry's been able to get the labour [and] keep the labour from being infected and get through that key harvest period".
"I might also add that it's been remarkable that there's been no real demand-side shock for that product. That consumers, despite not eating out and [being on] lower incomes, have continued to want healthy, safe New Zealand fruit and produce and that's kept demand up too".
"[Kiwifruit has been] mainly picked now, selling well, prices holding up well - it's a fantastic story".
Also in today's interview: Mackay asked Hunt who the real Lucky Country was when it came to the Covid-19 response.