Primary sector export revenue seen down 0.5% in FY2020
By Rebecca Howard
Sept. 16 (BusinessDesk) - Primary sector export revenue in the year ended June lifted 8.7 percent to $46.4 billion but is tipped to ease 0.5 percent as lower export volumes are forecast for most sectors, according to the latest Situation and Outlook for Primary Industries.
The Ministry for Primary Industries is expecting export revenue to reach $46.2 billion in the year to June 2020 and $47.5 billion in the following year.
Brexit and trade tensions between the US and China continue to be a concern for global trade, but so far New Zealand’s primary industries have generally been able to continue growing exports, it said. Part of that is due to global food demand running ahead of supply, particularly in China, and a lower New Zealand dollar increasing the competitiveness of New Zealand exporters.
Agriculture Minister Damien O'Connor said trade negotiations are key.
“We’re a trading nation and the government has an ambitious trade agenda. We’re working hard on opening up the world’s largest economies to our primary exports," he said.
“When concluded, the Regional Comprehensive Economic Partnership Agreement will anchor New Zealand in a regional agreement which covers 16 countries, almost half the world’s population and markets that take more than half our total exports. It will also provide us a free trade relationship with India, a fast-growing economy with a GDP of more than $2.6 trillion in 2018.
“Trade negotiations with the EU and updating our FTA with China are also priorities," he said.
While prices are expected to remain high for most products, lower export volumes are forecast in most sectors in the current year. Dairy and red meat volumes are expected to drop after benefiting from above-average pasture growth last season, and lower log prices are expected to drive a decrease in forestry production and exports, MPI said.
Meat and wool export revenue is forecast to reach $10.1 billion for the year ending June 2020, a 1 percent fall from the previous year due to a slightly lower production outlook, it said.
The ministry also noted the impacts of African swine fever "are becoming more apparent." Chinese domestic prices for all meat and poultry have reached record levels, triggering a strong rise in imports of all animal protein and a rise in meat prices globally. This will benefit New Zealand red meat exports, but is also likely to result in higher pork prices for New Zealand consumers since 60 percent of domestic consumption is imported, it said.
Regarding logs, it notes that export prices were 17 percent lower in July than they were in May. Large volumes of log and timber imports from New Zealand, Russia, and Europe over the past six months appear to have created a backlog of supply in China and that will take some time to work through before prices can recover, it said.
Harvest volumes are likely to fall in response to these lower prices, especially for more price-sensitive small woodlots. Forestry exports for the year ended June reached $6.9 billion. Just over half of this value was due to log exports, through record-high harvest volumes and prices. Forestry exports for the year ended June 2020 are expected to drop 16.2 percent to $5.8 billion, as lower log prices lead to lower harvest volumes and fewer log exports.
Dairy exports, however, are expected to lift 2.8 percent to $18.6 billion in the year to June 2020. "Strength in global dairy commodity prices is expected to support New Zealand prices and should offset any volume declines," MPI said.
The outlook for seafood is also positive, with strong international demand and a low New Zealand dollar expected to continue supporting good prices in both wild capture and aquaculture, it said. Seafood export revenue is forecast to rise 5.5 percent in the year ending June 2020 to $2.07 billion.
Horticulture export revenue jumped 13.7 percent in the year ended June to $6.1 billion, supported by excellent harvest volumes across the sector in 2018. It is forecast to grow 3.8 percent to $6.3 billion in the year ended June 2020.