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Agriculture outlook update

18 December 2001

Media Statement

Agriculture outlook update

Gross revenues from agriculture and forestry are expected to rise in the year to March next year, Agriculture Minister Jim Sutton said today.

Mr Sutton said the December update to the Situation and Outlook for New Zealand Agriculture and Forestry report suggested that while some products would suffer from an expected downturn in the global economy, other products would perform better in the next four years.

The consequences of the 11 September terrorist events on the growth outlook for the US economy were expected to weaken international dairy prices and forestry export revenues, but other factors were having a positive impact on New Zealand export prices, he said.

These include a generally more favourable exchange rate environment, and the EU animal health crises of BSE and FMD leading to increased prices for New Zealand sheep meat exports.

The value of pastoral exports for the year to March next year is estimated to rise by 19% to $13.43 billion, mainly due to a $1.46 billion rise in dairy exports as a result of favourable exchange rates and increased export volume. By year ending March 2005, export value is projected to fall to $12.50 billion, due to an appreciating exchange rate.

Horticultural exports are estimated to rise by 1% to $2.04 billion for the year ending March next year, mainly reflecting a rise in apple price moderated by a fall in kiwifruit price. By year ending March 2005, horticultural export value is projected to increase to $2.22 billion, mainly reflecting growth in wine from $226 million to $325 million.

Total gross revenue for year ended March 2002 is estimated to rise 8% to $16.49 billion, reflecting increases from dairy, cattle and agricultural services. For the year ended March 2005, gross revenue is projected to decline to $15.59 billion, mainly reflecting decreases from dairy, cattle and sheepmeat.

For the year ending March 2002, forestry exports are estimated to rise 4% to $3.72 billion, due to increased volume and a favourable exchange rate environment. That will increase to $4.18 billion by the year ending March 2005, due mainly to rising volumes of all forestry products.

The disease shocks of BSE and FMD, while tragic for the European Union producers, are expected continue to be beneficial to New Zealand exporters through increased product prices over the next three years. With the collapse in demand for beef in other European countries, beef imports have increased into the Britain, but beef prices, while lower than a year ago, are still running 20% above EU reference price. The recent discovery of BSE in Japan has lowered demand for beef in Japan and imports have suffered, particularly from the United States. This will place downward pressure, in the short term, on US beef prices.

The last case of FMD in Britain was on 30 September 2001 and a total of 2030 properties were infected during the outbreak and 4 million animals were slaughtered on 9,562 properties. In addition, one case occurred in Ireland, three cases in France and 26 cases in the Netherlands. On midnight 28 November, the last FMD infected areas in the counties of Cumbria, North Yorkshire and Durham were lifted. Disease free status is expected by the end of December 2001.

British livestock marketing was severely disrupted by the FMD outbreak and British export trade in livestock and livestock product of FMD-susceptible animals ceased. Trade in livestock products was opened up for a third of British rural area from the 6 November 200, and for two-thirds of the rural area from 20 November. Lamb prices for New Zealand exports to Britain have remained higher than the previous year due to supply restrictions and the threatened bulge in British domestic supply for the last quarter of 2001 has not eventuated.

The recent policy moves by the European Union and the United States on export subsidies, will lower international spot market prices for some dairy products, and are expected to adversely impact supply contract price negotiations.

Last year's drier than average conditions over most of the country extended into early spring, with wetter conditions prevailing to date. This has allowed significant recharge of ground waters and increased soil moisture. Consequently, favourable pasture conditions have been experienced for animal births and spring productions.

ENDS


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