Solid growth ahead for primary sector

The Ministry of Agriculture & Forestry  is forecasting sunny times for the primary sector over the next five years in spite of a stormy outlook for domestic and international ecnonomies.

The 2008 Situation and Outlook for New Zealand Agriculture and Forestry (SONZAF) 2008 report , expects international demand for food products to keep key commodity prices buoyant for the next five years.

MAF says while traditional Western markets are slowing, this is expected to be offset by continued growth in fast-developing Asian economies such as China, India and other developing and oil exporting markets.

“Individual sectors all face their own challenges, but overall the combination of strong commodity prices, growing global food demand and new market developments – such as the China FTA signing – presents positive opportunities for the primary sector over the next five years,” MAF Director-General Murray Sherwin says.

Challenges at home include the 2008 drought, which continues to have a significant affect across the sectors. In the meat sector, this has resulted in wide-spread de-stocking that will lead to falling beef and lamb export volumes next year.

Export returns, most noticeably in the meat, kiwifruit and forestry sectors have also been eroded by the high New Zealand dollar. And high fuel and fertiliser costs have undermined improved commodity returns. The economic outlook in some of the key markets, such as the United States, is also constrained.

Lamb and beef prices are improving and the outlook is brighter in both sectors than it has been for sometime, Mr Sherwin says.

Beef export earnings, for example, are projected to increase by more than 40% over the forecast period.

Based on Treasury assumptions of easing exchange and interest rates, MAF also expects farm gate returns to be boosted.

This is encouraging – but the low dollar which increases returns also increases the price of major inputs including fertiliser, fuel and machinery.

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