NZ primary sector exports to fall 8% in 2015
NZ primary sector exports to fall 8% in 2015; four-year outlook shows strong recovery
By Fiona Rotherham
June 9 (BusinessDesk) - New Zealand's primary sector export revenues will probably drop 8 percent to $35.2 billion this year, due to a substantial decline for dairy and forestry products although the outlook for the next four years is rosier.
The Ministry for Primary
Industries’ latest Situation and Outlook for Primary
Industries shows revenue for dairy, the traditional
heavyweight in the primary sector accounting for 40 percent
of total export revenue, is expected to decrease 22 percent
to $14.2 billion in the year ending June 30,
2015.
Forest products are forecast to fall 10 percent
to $4.63 billion. The slowing Chinese economy and real
estate market, coupled with high log inventories and the
potential for more Russian imports, mean the outlook remains
tough for log and timber exports into China for the rest of
this year.
MPI director Jarred Mair said it had been a
tough year with volatility in overseas markets for some of
New Zealand’s key export commodities and challenges to
production from climactic events such as drought, storm and
floods.
The SOPI gives a positive outlook through to
2019 with total primary sector export revenues expected to
be up 17 percent from 2015 to $41.3 billion, underpinned by
income and population growth in China and Southeast Asia and
a recovery in the US housing market.
China remains New
Zealand's most important export market despite a reversal in
the strong demand for dairy and an end to the construction
boom that earlier lifted forestry export
earnings.
“Excessive inventories and slowing
construction have reversed these price gains for the 2015
year," Mair said. "We expect the Chinese economy to slow
down a little bit but still remain our largest export
destination, with continued strong growth from the Asean
countries, and longer-term demand from India."
The big change in India will come when a strong cool chain is established that will mean premium-end primary products don’t deteriorate too fast in the hot climate. “That’s starting to be developed now. We expect apples to be a forerunner into that market and other products such as timber.”
Overall, Mair said he expected horticulture to perform strongly in the next four years, dairy to recover, and some high-value niche products to start to make their mark.
“I’d watch for a lot of food products where
some new innovation is coming out, including in existing
categories such as dairy," he said. "It’s about that
switch from commodities to high value, we’ve seen that
quite significantly in the past two years."
Offsetting this year’s drop in dairy and forestry were higher beef and veal prices, growing demand for seafood, a recovery in the kiwifruit industry, and higher wine exports. The small but growing “other” primary sector category is also forecast to lift 26 percent this year to $1.96 billion on the back of demand for innovative processed foods, honey, and live animal exports, mainly driven by dairy cow exports to China.
There’s uncertainty about when constrained
world dairy prices will lift and a rebalance in milk supply
and demand, with depressed short-term demand from the
world’s two largest importers, China and Russia. Low
prices have led to new markets emerging in Southeast Asia,
the Middle East, and North Africa.
The SOPI expects
China’s import demand for dairy to recover during the June
2016 year, although the high prices achieved in 2014 are
unlikely to return. Overall dairy export revenue is forecast
to grow at a compound annual growth rate of 6.8 percent from
2015 to 2019, starting in 18 months.
That rise will
be driven mainly by price rather than volume increases with
New Zealand milk production forecast to drop slightly next
year due to lower prices before starting to grow again in
following seasons. The farmgate milk price is forecast to
be $5.62 per kilogram of milk solids in the 2016 May year,
and the milk price is projected to average $6.70/kgMS from
2017 to 2019, factoring in a continued gradual depreciation
of the kiwi against the US dollar.
Total meat and wool
sector export revenues are expected to be up 8 percent this
year to $8.75 billion, with high prices for beef and veal
and strong New Zealand production countering weaker returns
for sheepmeat, venison and some co-products. Beef export
prices are thought to have peaked and the forecast is for
prices to be maintained over the next 12-to-18 months before
softening as global supply grows.
The US housing
market recovery should stimulate timber exports in the
forestry sector and the medium-term prospects for the
Chinese log and timber trade remain positive. Supply will be
enhanced by plantings in the 1990s that can be harvested in
the next few years.
Prices are thought likely to remain high in the seafood sector with growing demand from the top export destinations of China, Europe and the US. Australia, New Zealand's second-largest market, declined 4 percent this year due to the strong depreciation of the Australian dollar against the kiwi.
Aquaculture, which accounts for 19
percent of the forecast $1.51 billion total seafood export
value this year, is likely to be a key driver of future
growth through planned expansion of salmon farming and
increased mussel production. Total seafood exports are
forecast to rise 19 percent to 2019, with aquaculture
research trials and initiatives into new species underway
including kingfish, geoduck and hapuku.
In the
horticulture sector, total revenue is expected to be $3.97
billion this year, and to rise to $4.68 billion by 2019.
High export volumes due to last year’s record harvest
means wine export revenue should be up 3.2 percent this year
to $1.36 billion, making it New Zealand's sixth-largest
export. The lower export price per litre of $6.59, down 40
cents, reflects weaker economic conditions in some markets,
particularly Australia, and bulk versus bottle exports
rising from 30 to 35 percent. Revenue is expected to hit
$1.6 billion by 2019 with market diversification allowing
more exports of higher priced wines and the export price per
litre rising to $7.30 by 2019.
The kiwifruit industry
has recovered from the devastating Psa disease with
kiwifruit export revenue is likely to rise 19 percent this
year to just over $1 billion. Gold kiwifruit sales are
surging and a 150 percent lift in export volume is forecast
in the next two years, while green kiwifruit volumes will
fall
slightly.
(BusinessDesk)