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Exports grow but on-farm expenditure to decline

17 December 2003

Agricultural exports grow but on-farm expenditure to decline - SONZAF


MAF's latest Situation and Outlook for New Zealand Agriculture and Forestry (SONZAF) reports reveal a mixed outlook for international prices, with rising export values for agricultural and forestry products over the medium term, but a reduction in agriculture's contribution to New Zealand's GDP.

The overview report says that the high New Zealand dollar will continue to have an impact on commodity prices through the outlook period. The past year saw many of New Zealand's agricultural and forestry products suffer from both lower international prices and the stronger New Zealand dollar. Drought also affected areas of the south-western North Island.

This is in comparison to the 2001/02 season that experienced a weaker New Zealand dollar, generally favourable international prices for key products, and good climatic conditions. MAF forecast at the time that the effects of this would not last.

The SONZAF reports say that over the next two to four years dairy product, lumber and panel international prices are projected to rise while beef, pulp and paper prices are likely to rise to 2004-05 before falling.

Lamb and mutton prices are projected to fall while log prices are projected to remain relatively static.

However, the New Zealand dollar's persistent strength is projected to moderate the effects of any international price rises on the prices that New Zealand's producers and processors receive.

The main export trends over the outlook period from March year 2003 to March year 2004 are:

- total export value for agriculture and forestry is projected to rise by 19 percent, from $18.1 billion to $21.6 billion, mainly as a result of increasing dairy and forestry export values;
- dairy product export value is projected to increase by 35 percent, from $5.92 billion to $8.02 billion, resulting from rising volumes and prices;
- forestry product export values are projected to rise by 18 percent, from $3.68 billion to $4.33 billion, owing mainly to increasing volumes;
- export values for meat are projected to remain static at $4.32 billion, reflecting the net effect of falling prices and rising volumes;
- the export value of horticultural products is projected to increase by 32 percent, from $2.09

The reports say the contribution of the agriculture sector to New Zealand's Gross Domestic Product is projected to fall by two percent over the outlook period.

Agriculture's contribution to GDP for the year to March 2003 has been provisionally estimated at $8.08 billion. MAF projects this will fall to $7.92 billion in the year to March 2007 as farmers respond to a five percent drop in total income by reducing their on-farm expenditure by eight percent.

The reports say that dairy farming's contribution agricultural sector revenue is likely to rise by 20 percent over the outlook period - from $4.71 billion in the year to March 2003 to $5.65 billion in the year to March 2007.

However, this will be offset by falling revenue from beef cattle, sheep meat and wool.

Advances in science and technology are transforming the land-based primary industries and will continue to be a catalyst for the sectors to maintain their competitive edge as unsubsidised low-cost producers.

This is highlighted by the fact that New Zealand's biggest private sector investor in research and development is the Fonterra Co-operative Dairy Group. MAF says the country's primary sector producers and processors continue to be among the country's leading adopters of new technology and scientific developments.

Ends

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