NZ agricultural exports resilient despite US tariffs, says economist

Westpac industry economist Paul Clark forecasts that this season's farmgate milk price will remain at $10.30 per kg of milk solids.

By RNZ

• NZ key commodity exports to face limited impact from US tariffs/trade dislocation
• Prices for exports set to remain elevated
• Dairy payout to stay around $10 a kilo of milk solids

Agricultural export prices are expected to be resilient to the United States’ tariffs, though increased competition in New Zealand’s key markets may eventually put pressure on prices.

Westpac industry economist Paul Clark forecast this season’s farmgate milk price to remain at $10.30 a kilogram of milk solids, with next season pricing easing slightly to $10, with risk to the upside.

He said pricing depended on how well the New Zealand dollar responded to the US trade war.

Meat prices were expected to see further increases, given favourable supply and demand, though prices will be little changed from long-term averages on an inflation-adjusted basis.

Clark said increased beef prices reflected production constraints in the United States, given less supply from most major producing countries and strong demand.

He said the 10% tariff on New Zealand beef exports to the US was likely to be manageable, especially given the limited ability of US purchasers to substitute the type of beef that NZ exports.

Lamb prices were also expected to lift, mainly because of stronger demand out of Europe and the Middle East.

“That said, with extra supply coming out of Australia and the UK over the next couple of months, price gains are likely to moderate,” he said.

Horticultural prices are also likely to remain elevated, with higher orchard gate returns for kiwifruit and apples over the coming season.

However, demand for building products was under pressure.

“Export log prices are likely to move sideways this year,” Clark said.

“Policy interventions in China have had little effect on log demand so far.

“The trade war between the US and China could reduce demand for logs, further stifling prices.”

- RNZ