Key facts for primary sector outlook

August 7, 2008

MAF’s SONZAF (Situation and Outlook for Agriculture and Forestry)  key facts  indicate:  

Dairy

  • Dairy export earnings are projected to peak next year at $12 billion – more than 40% higher than earnings two years ago.
  • Dairy export earnings are projected to ease back to $10.5 billion in 2010 before rising again to just under $12 billion by 2012.
  • The weighted average payout (net of industry goods levy) for the next four years averages around $6 – significantly higher than the previous five year period. Detailed payout projections are $6.90 (2009), $5.78 (2010), $5.98 (2011), $6.32 (2012).
  • Demand is growing from new markets in China and OPEC countries. OPEC countries account for 21% of New Zealand’s total dairy exports.
  • The South Island continues to drive dairy herd expansion. The South Island herd grew by 13% last year – 31% of New Zealand’s dairy herd is now in the South Island.

Beef

  • Manufacturing beef (a type of minced beef) prices are expected to rise by more than 30% over the five year forecast period.
  • Beef export volumes are projected to fall by about 2% next year due to drought but to grow back to 2007 levels by the end of the five year forecast period.
  • Export returns currently at $1.5 billion are expected to climb steadily to $2.26 billion by 2012.

Lamb

  • Sheep numbers were down 4% at June 2007.
  • The drought and recent low prices are pushing further declines in sheep numbers – adult sheep slaughter increased by 28% for the year ended June 2008.
  • Lower stock numbers and lower weights mean lamb export volumes are projected to fall through the five year period by 11% to 287 000 tonnes.
  • Higher prices are set to push overall export earnings over the same period up by 25% from the current $2.1 billion to $2.6 billion.

Wool

  • The average wool sale price is projected to rise by just over 40% over the next five years to $5.35 per kilogram.
  • Wool volumes are projected to plateau as falling sheep numbers balance higher prices at 142 000 tonnes.
  • After an initial fall export earnings are projected to grow by 29% over the five year period to $795 million.

Forestry

  • Log prices and pulp prices are both projected to climb by more than 30% over the next five years.
  • Timber and panel export prices are projected to fall before recovering but volumes remain relatively flat over the next five years.
  • Overall forestry export returns are projected to grow from $3.3 billion in 2008 to $4.5 billion in 2012.

Wine

  • Wine grapes are now the largest single horticultural crop in New Zealand at more than 25 000 hectares.
  • A big harvest this year will boost export volumes by 30% in next year and increased plantings will push exports up by more than 50% by 2012.
  • The value of wine exports is projected to rise by 76% to $1.3 billion by 2012.
  • Sauvignon Blanc makes up 75% of wine exports and is New Zealand’s largest wine export followed by Pinot Noir, Chardonnay and Merlot.

Kiwifruit

  • The current average price of $8.1 per tray of kiwifruit is projected to grow to $10.7 a tray by 2012.
  • Predicted kiwifruit export volumes remain static at just under 100 million trays over the next five years.
  • Kiwifruit export returns are projected to grow from $779 million dollars to $1.06 billion by 2012. 

MAF’s assumptions are based on expectations for “normal” climatic conditions with no allowance for domestic or international natural disasters nor major economic changes. Projections are based on Treasury’s exchange rate assumptions from the 2008 Budget.


Solid growth ahead for primary sector

August 7, 2008

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.


Ag class report

August 6, 2008

The Ministry of Agriculture and Forestry’s five year primary sector report card will be released tomorrow.

The  Situation and Outlook for New Zealand Agriculture and Forestry 2008 report  (Sonzaf) forecasts the trends and performance for the next five years.

While it’s looking ahead,  Owen Hembry  looks back:

And as for some recent performances, here’s the report card:

Well done Dairyton, keep up the good work, go to the top of the class.

Meatly, you’re full of ideas and have plenty of promise but you need to focus lad, focus.

Wineston, well done, results worth celebrating but don’t pop too many corks because your studies will get harder.

Woolley, very industrious, A for effort but poor results, put your cap on straight and don’t forget about the point of your assignments.


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