Farm, forestry exports bounce back

Photo / Brett Phibbs

New Zealand's farm and forestry exports are bouncing back in the wake of the global recession, agricultural economists say.

"Primary producers have picked up where they left off pre-recession, with most in the pastoral, horticultural and arable sectors expected to see improved or steady conditions," Ministry of Agriculture and Forestry analysts said today in their outlook to 2014.

Beef, lamb, wool, wine, kiwifruit and forestry sectors were all projected to receive higher prices over the five years.

Dairy production has been left flat by the effects of drought this year - despite a lift of 4 per cent in numbers of dairy cows available for milking in the 2009-2010 season - and total dairy export earnings are estimated to be down 16 per cent, to $9.94 billion for the year to June 30.

But the MAF economists expect production to rebound in 2011, with a milkprice of $5.60/kg milksolids, compared with $6.10 in 2010 and to be further lifted by continuing increases in herd numbers.

And though an international lift in milk production was expected to constrain dairy commodity prices in the next couple of years the milk price was expected to hit $7.21/kg in the year to May 2014. In that season, dairy earnings were expected to reach $15.7b.

MAF director general Murray Sherwin said a major feature of the farm and forestry-driven recovery had been continuing growth in China.

"China dramatically increased its purchases of agricultural and forestry products from New Zealand for the year ended December 2009," he said. Earnings from primary product exports to China rose 49 per cent, to $2.19b, with dairy and forestry the big contributors.

Westpac economists said last night that the fact that the nation's commodity prices were hitting multi-decade highs, was a "remarkable achievement" just 18 months past the worst of the global financial crisis.

They noted big jumps in the proportion of primary production exports going to Asia and oil-producing countries, with 55 per cent of exports going to Australia and Asia, compared with 5 per cent 50 years ago.

The bank analysts said being tied to Asia was giving New Zealand farmers and foresters higher average commodity prices and economic growth and the rising importance of Asia as a destination -- particularly for dairy, wood and wool -- was expected to be boosted by the free trade agreement with China.

"China and other developing economies are still only at the early stages of their economic transformation," they said. "Another 260 million rural Chinese are expected to move into the cities by 2030. We expect the next 20 years to be characterised by relatively elevated commodity prices".

Sherwin said most trading partners had returned to growth as well, while the demand from the aspiring middle classes in developing economies was keeping conditions for food exporters buoyant.

But he noted "considerable uncertainties": and said dairy prices were particularly volatile.

"Rapid price shifts, either up or down, cannot be ruled out".

There was also concern that the build-up of sovereign debt in a number of developed economies posed risks for the global economy for some time to come.

"Our exporters can afford to be optimistic about the medium-term picture, but short-term fluctuations in conditions are inevitable," he said.

- NZPA