The current run of high red meat prices is expected to persist over at least the next two years, the latest Situation and Outlook for Primary Industries report says.
The report, released this week by the Ministry for Primary Industries, showed primary sector export revenue was expected to rise by 3.3 per cent in the year ending June 2020 — and it was forecast to further increase in 2021.
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The forecast was $1.7 billion higher than the previous forecast round, due to upward revisions to dairy, meat and wool, and forestry.
A lot of those gains could be attributed to rising global commodity prices and the drivers behind rising prices were likely to be sustained through 2020 and 2021.
In particular, a weaker New Zealand dollar over the course of this year had helped support strong returns for New Zealand exporters.
Red meat prices continued to exceed expectations due to rising demand from China that was "transforming" global protein markets.
The African swine fever outbreak in China was the main driver of increased import demand, and drought in Australia had further reduced global beef and sheep meat supply.
The situation in those countries was unlikely to reverse soon, the report said.
Meat and wool exports were forecast to reach $10.4 billion — up 2.5 per cent — although wool export revenue was forecast to fall to $490 million for the year ending June 2020, an 11 per cent decrease from the previous year.
Dairy export revenue was forecast to rise 8.4 per cent to $19.6 billion, while strong demand out of Asia should sustain continued price strength for the remainder of the season.
Farm debt remained high, particularly in the dairy sector. Banks had been tightening
lending policies over the past year, and an RBNZ policy requiring banks to hold more capital might add to that trend.
That could reduce farmers' ability to borrow money to invest in environmental mitigations where required, the report said.
On-farm bank debt had increased by $30.1 billion since 2003 and currently stood at $41.4 billion, a 267 per cent increase since 2003.
Relative to production, farm debt levels had more than doubled from $9.48/kg milk solids in 2003 to $21.99 in 2019, while the average level of bank debt held per hectare had more than tripled since 2003, rising from $7700 to $23,600 in 2018.
The ratio of non-performing loans in the dairy sector had doubled over the past three years.
Currently at 2.1 per cent of the dairy sector total, that figure was three times higher than that of other comparable primary sector industries.
Figures from Statistics NZ yesterday showed beef cattle numbers increased strongly in 2019, growing for the third year in a row while a number of dairy cattle dipped slightly.
Provisional figures from the 2019 agricultural production survey showed beef cattle numbers rose 5 per cent to 3.9 million in June 2019.
Dairy cattle numbers were almost unchanged this year, down about 31,000 to 6.4 million.
Dairy cattle numbers fell in both 2017 and 2018 and were down from their record high level of 6.7 million in 2014.
Forestry exports for the year ending June 2020 were forecast to fall 12.8 per cent to $6 billion compared with the previous year when prices and volumes were at record highs.
Horticulture was predicted to deliver a 4.7 per cent rise across the entire sector, driven by increases in kiwifruit, wine, apple and pear exports.
Seafood annual export earnings could surpass $2 billion for the first time, as growth was forecast at 6.5 per cent.
Read the latest Situation and Outlook for Primary Industries report below: