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Forecast good for the country’s primary producers

The forecast is good for the country’s primary producers

Ministry of Agriculture and Forestry (MAF) forecasters say prospects are on the up for most of the country’s farmers, growers and foresters.

The Ministry’s 2004 Situation and Outlook for New Zealand Agriculture and Forestry (SONZAF) report says looking out to 2008, the total export value of pastoral agriculture, horticulture and forestry products is projected to increase 23 percent.

Senior Policy Analyst and the co-ordinator of SONZAF, Tony Wharton, says this will take the total export value from $17.0 billion this year to $20.8 billion in 2008.

The largest contributors to this increase are dairy, (up $1.57 billion) and forestry (up $1.33 billion.

The report does, however, project meat export value to decrease by $69.0 million, while wool export values should rise by $160 million and the total value of horticultural exports is expected to rise by $804 million.

SONZAF is an annual roundup of New Zealand’s main agriculture and forestry industries, covering the major issues and trends, the current situation and the medium-term outlook. Each article is written by an industry specialist, and incorporates both modelled price, production and export projections with industry intelligence. One particular feature of SONZAF this year is that it includes projections based on two alternative exchange rate tracks as well as the main projections. This enables readers to better understand the prices that could result should exchange rates differ from those used in the main projections.

By the end of the outlook period, dairy will continue to be the largest export earner of the land-based sectors (35 percent of land-based primary sector export value), followed by forestry with 21 percent and meat with 20 percent.

Looking at exchange rates, Tony Wharton says the SONZAF report is based on rates supplied by The Treasury, which assume that the value of the New Zealand dollar against all the major world currencies will plateau in the first half of 2005, and then slowly depreciate over the outlook period.

Mr Wharton says total gross revenue (at farmgate) for the agriculture sector is projected to increase from $15.3 billion in the year to March 2004 to $17.7 billion in 2008 – a 16 percent increase.

“Comparing the March 2004 year to 2008, we expect to see significant increases in gross revenue for dairy (milk production), agricultural services, fruit, nuts and oil seeds, and sheep meats,” Mr Wharton says.

Looking at the year that’s been, Tony Wharton says several of the major factors that have impacted on the agriculture and forestry sectors are examined in the SONZAF. These include the stronger New Zealand dollar, rapidly rising oil prices, continued drought in Australia, snowfall and flooding disrupting production and rural communities and the cold winter and spring hampering pasture growth.

Highlights in brief:

The dairy industry had another record season in May year 2004, with milksolids production rising by five percent and the industry average payout increasing by 16 percent. The outlook for production is good, and while the payout is projected to fall in the 2005/06 season, it is projected to recover after that.

Beef and veal production rose in September 2004, but over the outlook period is expected to decline. Beef schedule prices are projected to fall out to 2006, and then rise out to 2008.

Lamb and mutton production fell in the year to September 2004 and record high international prices were achieved in the UK market. Over the outlook period sheep meat production is predicted to rise, as are lamb schedule prices.

Total wool production fell slightly in the year to June 2004. Over the outlook period, average auction prices for wool are projected to rise steadily.

The year ended June 2004 produced a record wine grape vintage and production is continuing to expand. Over the outlook period, the industry will be reliant on growth in export sales matching growth in production volumes.

Some major forestry growers have drastically reduced their levels of harvest in order to increase the age profiles of their crops. This, in turn, has reduced volumes of export logs in March 2004, but other products increased. Volumes of all forest products are predicted to rise over the outlook period, with the exception of pulp and paper which face a cyclical downturn in 2008. Pulp and paper prices are projected to increase out to 2007 before falling in 2008, while all other forestry product prices are projected to increase over the forecast period.

The quantity of export apples is estimated to reach record levels this year. This, together with increased competition in New Zealand’s major markets and unfavourable exchange rates, has resulted in poor returns to growers. Despite an increase in export quantities over the outlook period, export and grower returns are forecast to only increase marginally over the period.

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