Saturday, March 30, 2024

SOPI report: Sector rides storm, growth forecast

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Food and fibre export earnings for the past 12 months are forecast to be slightly down on the year before, but are predicted to rebound and set a new record during the next year.
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The June 2021 Situation and Outlook for Primary Industries (SOPI) report says the sector has performed strongly in the year to June 30, despite the challenges presented by covid-19.

Export revenue for the year is forecast to fall 1.1% to $47.5 billion but for the following year it is predicted to reach $49.1b – up about $1b on the highest ever in 2019-20 – as demand begins to recover for the sector’s main export products and in destination markets.

In addition, the NZ labour supply situation is expected to improve as more skilled and seasonal food and fibre sector workers re-enter the country, or are recruited from within NZ, and covid supply chain disruptions are eventually resolved.

The report says dairy export revenue is forecast to fall 5.4% to $19b in the year to June 30, because of covid-related disruptions and an appreciation of the NZ dollar (NZD).

It says in the first half of that period, dairy revenue was down substantially on the back of global supply chain and market disruptions, and low prices for key commodities.

Global dairy prices increased significantly in the second half of that timeframe, but they arrived after the season’s peak. 

Although too late to have a material impact on the tail-end of the 2021 year, the report says it is a promising sign for the coming season.

Despite slightly lower dairy cow numbers, milk production for the 2020-21 season is forecast to increase 1.9%, supported by favourable weather conditions and a strong farm gate milk price.

Meat and wool export revenue for the year ending June 30 is expected to fall 2.8% to $10.4b.

A drop in export prices has been offset by the highest red meat production volume since 2008, with beef, mutton, lamb and venison export volumes all forecast to increase this year.

Prices have been hurt by covid-related foodservice closures, freight problems and a stronger NZD, but the impact of African swine fever in China continues to drive underlying demand.

Prices are expected to recover strongly during the next year or two, supported by the reopening of global foodservice and strong demand from China.

The forestry sector has made a quick recovery during the past year, after being perhaps the hardest hit during NZ’s lockdown, the report says.

Forestry export revenue is forecast to reach $6.3b in the year to June 30, an increase of 12.8% from 2019-20, when the forestry sector was prevented from operating during Level 4 lockdowns.

Harvest volumes are set to reach 36.5 cubic metres in 2020-21, up 14.5% from the year before. Log volumes are expected to increase 21.4%, reflecting increased demand for export logs.

China has been quick to resume infrastructure investment during the past year, leading to strong demand for export logs, which is expected to continue into the medium-term.

Forestry Minister Stuart Nash says increases in harvest and log export volumes in the last 12 months is testament to the forestry sector’s resilience and hard work and is something it should be proud of.

“In January 2021, we also successfully signed our FTA upgrade with China, which included eliminating tariffs for 99% of NZ’s nearly $3.3b wood and paper trade to China,” Nash said.

Overseas demand for NZ fresh fruit and wine has remained strong despite covid-related disruptions.

Horticulture revenue is forecast to rise 2.3% to $6.6b in the year ending June 30, because of larger crops and export volumes of kiwifruit and avocados.

Poor weather in the top of the South Island and Central Otago during the growing season dented wine, apple and cherry production, along with the shortage of seasonal labour.

The report says industry responses to labour supply and freight problems are expected to result in reduced or static planted areas for some crops in the short-term.

On the upside, kiwifruit production continues to expand at a rapid rate thanks to higher yields, and export revenue is forecast to exceed $3b by the year ending June 30, 2023.

Arable export revenue is expected to fall $21m to $270m in the year to the end of June, down 6.8% from 2019-20, which was a record high.

Most crop yields in 2020-21 are in line with long-run trends but down from last year, as seasonal conditions were not as favourable.

Covid helped stimulate demand for some seeds but created export freight problems.

Vegetable seed sales remain steady, with the planted area for the 2021-22 harvest similar to the past 12 months.

Northern Hemisphere demand for forage seeds is strong, but could level off during the next year with a good harvest expected in Europe.

Export revenue from processed foods and other products is expected to reach $3.1b in the year ending June 30, up 2.5% from 2019-20. The key contributors are increases in live animals (74%) and honey (12%).

Honey export volumes have increased markedly this year, driven by increased demand for products with health benefits and beekeepers continuing to clear stocks.

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