NZ primary sector exports to surge by 2015 on weaker dollar, increased output, MAF says

June 14 (BusinessDesk) – 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% 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%, 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 U.S. 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% 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% in 2011 and 2012. Growth will be concentrated in emerging markets, with China expected to expand 9% in each of the next two years and India to grow 8%.

The U.S. 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% to $6.1 billion between 2011 and 2015, and kiwifruit, up 42% to $1.3 billion.

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

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

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% in value to $630 million. Apples and pears are forecast to rise 13.8% 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.

(BusinessDesk)

BUDGET 2012:
Parliament Debate Live - Video Of Budget 2011
Keith Ng Interactive Graphic: How the Budget Breaks Down
BUDGET 2012 - FULL COVERAGE: Reports / Analysis - Press Kit - Reaction (from everybody) - Previews (from everybody) - Pre-Budget Announcements

Gordon Campbell: On the Budget’s Spreadsheet Victories

It wasn’t as if expectations were sky high, exactly. Chances are, it was always more likely that we’d be seeing Bigfoot rampage through the Beehive lock-up than catch a glimpse of a credible growth agenda from this government. More >>

Sludge Budget Report - Short The Dollar! MEMO: To international bankers FROM: C.D. Sludge Please short the dollar! It'll be good for both you and us. And you know you want to. Greexit, Eurogeddon... watch out... flight to quality and all that. Follow your instincts. The NZ Debt Management Office has been so surprised at the unprecedentedly low interest rates that it can borrow at that it has already entirely pre-funded the 2013 fiscal deficit - all $8 billion of it! More >>

Pattrick Smellie Comment: Doddling along the best we can hope forCriticising Budgets for lacking vision or imagination is like shooting fish in a barrel, but even so, this year's Budget again feels like a missed opportunity. Perhaps it's the intrusion of real world needs that means the government couldn't make better political use of the $558.8 million it expects to gather in its first partial asset sale. More >>