NZ primary sector exports to surge by 2015, says MAF

The value of NZ's primary exports, like logs, wine and dairy is predicted to soar over the next few years. Photo / Mark Mitchell

The value of New Zealand's primary sector exports is forecast to surge in the next four years, even as production increases more modestly, based on the Treasury's forecast of a plunging kiwi dollar.

Between 2011 and 2015, the value of dairy exports will have soared 40 per cent to a record $18.29 billion, according to the Ministry of Agriculture and Forestry's latest Situation and Outlook report, released today.

In that time, milk production will have grown by 11 per cent, the report says.

"Beyond 2012, steady production growth in dairy, forestry, wine and kiwifruit, together with an assumed depreciation in the New Zealand dollar, leads to strong forecast growth in export revenues," MAF says in the report.

The kiwi dollar touched a post-float high 83 US cents this month and was recently at 81.59 cents. The trade-weighted index was recently at 70.34. Based on Treasury forecasts in last month's Budget, the New Zealand dollar will plunge 29 per cent against the greenback in the next four years while the TWI will shed a fifth of its value.

MAF cites Treasury projections for the local currency to remain "at historically high levels" until mid-2012 before depreciating to "around the historic averages."

Global economic growth will ensure demand for New Zealand's commodities, with the International Monetary Fund forecasting the world economy to grow 4 per cent in 2011 and 2012. Growth will be concentrated in emerging markets, with China expected to expand 9 per cent in each of the next two years and India to grow 8 per cent.

The US economy is still in recovery mode and the European Union has the most subdued economic outlook among New Zealand's major trading partners, the report notes.

Dairy is expected to remain the supreme export product in the next four years though its surge is value will lag behind forestry, which is seen growing 42 per cent to $6.1 billion between 2011 and 2015, and kiwifruit, up 42 per cent to $1.3 billion.

Export volumes for forestry and kiwifruit are seen rising a more modest 5.6 per cent and 6 per cent respectively.

Lamb is also projected to have stellar growth of 39 per cent to $3.7 billion by 2015, though wool rises by a milder 14 per cent to $827 million as volume declines 6 per cent. Beef climbs 34 per cent to $2.6 billion as output rises 9.7 per cent. Exports of wine will grow 35 per cent to $1.49 billion by 2015 as the volume of wine shipped rises 9.4 per cent.

Vegetables and apples and pears are the laggards in the MAF report. It only projects vegetable exports to 2014, by which time they would have grown 12.5 per cent in value to $630 million. Apples and pears are forecast to rise 13.8 per cent to $455 million.

The latest MAF report shows a rosier outlook for the primary sector than it did 12 months ago.

"The economic outlook for New Zealand agriculture and forestry's trading partners, while still uneven, is significantly better than 12 months ago," it says. "Many of the financial risks have faded as private sector balance sheets have been repaired."

Gross revenue from agriculture is forecast to rise to $32 billion by 2015 from an estimated $24.3 billion in the year ended March 31. That translates to 2015 income for the sector of $6.9 billion from $4.5 billion.