$3bn more from primary sector

The primary sector will deliver an extra $3 billion to the economy in 2008, the Ministry of Agriculture and Forestry (MAF) predicts.

In the ministry's annual Situation and Outlook report, industry analysts forecast that pastoral agriculture, horticulture and forestry would generate 23 per cent more income by 2008.

MAF senior policy analyst Tony Wharton said that would take the sector's export value to $20.8 billion in 2008 - up from $17 billion this year. The biggest contributors to the rise were expected to be dairy, up $1.57 billion, and forestry, up $1.33 billion.

"Comparing the March 2004 year to 2008, we expect to see significant increases in gross revenue for dairy, agricultural services, fruit, nuts, oil seeds and sheep meats," Wharton said.

Milk production volumes were expected to keep rising.

The report predicted a drop of $69 million in the value of meat exports by 2008.

This would largely be caused by falling returns and volumes for beef and veal exports - in part because they would not be able to sustain their golden run in Asian markets due to the ban on North American beef. North American beef is expected to re-enter the Asian market some time next year.

But beef cattle numbers are also expected to fall as more farmers opt to raise sheep and dairy cattle.

Policy analyst Rod Forbes said sheep meat production was predicted to rise.

Sheep numbers had been falling as a result of the trend towards dairying but prices were now favouring sheep farming.

"Assuming the dollar depreciates and lamb carcass weights increase, we project lamb schedule prices to rise through to 2008," he said.

The report is based on exchange rates forecast by Treasury. These assume that the dollar will plateau against all major currencies then slowly depreciate.

The report also highlighted this year's bumper grape vintage- up 40 per cent on last year. Major investment in marketing and research would be needed to find new markets for the increased volumes, it said.

It also predicted difficult times for apple growers, with increasing volumes to be sold at a time when international prices were falling.

The Situation and Outlook for New Zealand Agriculture and Forestry is an annual roundup of information on all parts of the primary sector, covering major trends, present conditions and the medium-term outlook.

As well as export returns, it canvassed issues such as water supply and the potential impact of World Trade Organisation negotiations.

Outlook

Total export value of agriculture, horticulture and forestry predicted to increase 23 per cent by 2008 to $20.8 billion.

Dairy will be the big winner, with export returns tipped to be $1.57 billion higher.

Export returns for sheep meat, wool, forestry and horticulture are also all expected to rise.

Beef returns are expected to fall slightly.