Meat and wool returns will be down while dairy rises slightly and forestry is stable, the Primary Industries Ministry says in its latest Situation and Outlook report.
Overall, it forecasts primary industry export revenue of $43.8b and increase of 2.5% on the June 2018 year.
“The latest update gives an encouraging assessment of our major primary sectors which continue to grow – up $1.1 billion from the previous year,” agriculture, marine and plant policy director Emma Taylor said.
The projected income is up $465 million on that predicted in June.
“It’s a promising outlook and builds on the strong growth seen in 2018 when export revenue increased 11.8%.
“In 2018 dairy prices recovered from the lows of 2015 and 2016, high red meat prices boosted meat and wool revenue and strong demand for logs in China led to record export prices and volume.
“Horticulture and dairy are the driving forces behind the increase forecast for 2019.
“Horticulture exports are forecast to rise 13.1% to $6.1b. Improved growing conditions for the most recent harvest has led to higher yields for kiwifruit and most other horticultural products.
“Dairy exports are forecast to rise 2.1% to $17b for the year ending June 2019, consolidating gains made in the last two years.
“With farm production growth likely to be relatively flat in coming years, revenue growth is expected to be driven by moves towards higher value products such as cheese and infant formula.
“Forestry exports are expected to remain stable at $6.4b for 2019. Log prices are expected to remain near record levels as Chinese construction activity is forecast to remain strong.
“After an impressive gain in meat and wool exports in 2018 exports are forecast to decrease by 1.3% to $9.4b in 2019.
“Despite forecast increases in farmgate prices for lamb and venison, decreasing production volumes are forecast to lead to lower export revenue overall.
“The latest outlook for our primary industries gives plenty of positives as we work to sustainably reposition primary industries up the value chain and deepen sector partnerships.”
MPI director-general Martyn Dunne said “Despite the considerable challenges faced by many of the primary export sectors over the past year, including biosecurity responses, challenging weather conditions and rising global protectionism, exports grew an impressive 11.8% to $42.7 billion for the year ended June 2018.
“Looking ahead, MPI’s successes will be increasingly defined by our work to deepen sector partnerships and reposition primary industries up the value chain.
“We are implementing this strategic vision through the establishment of branded business units within MPI and the exporter regulatory advice service,” he said.
The report’s overview said the trajectory of primary sector production and exports to 2020 and beyond will depend on industry’s response to an evolving operating environment, including trade disruption, shifting consumer preferences, increasing pest incursion risks and an emphasis on sustainability including measures to minimise New Zealand’s contribution to climate change and improve local environmental outcomes.
“Growth will increasingly come from getting more value from existing assets and the development of new, higher-value products such as Gold3 kiwifruit.
“These changes will increase the focus toward redefining how the primary industries contribute to the NZ economy by increasing productivity through innovation and by adding more value by deepening links to customers and seeking new markets.
“To make this transition towards sustainability it is imperative to learn how leading farmers are performing and extending those lessons to others, lifting the level of the industry as a whole.
“This will require a culture of trust, experimentation and sharing so that innovations can be adopted rapidly across sectors.
“There is also an opportunity to generate higher and more consistent returns from NZ’s existing resource base by moving further into value-add production, premium markets, and the establishment of recognisable consumer brands.
“An increasing number of consumers are willing to pay a premium for products with a clear message around ethical and sustainable production.
“NZ’s unique value proposition can be leveraged to create a story for our primary products that resonates with consumers, maintains market access and achieves consistently higher returns,” it said.
Sector by sector
Dairy
Dairy exports are forecast to rise 2.1% to $17b.
Forecast farm level production growth is likely to be relatively flat over the coming year. Against the backdrop of a recent weakening in global dairy commodity prices, forecast growth in export revenues is therefore expected to be driven by a changing product mix towards higher-value products such as cheese and infant formula.
Meat and Wool
After an impressive 14.2% gain in 2018, meat and wool export revenue is forecast to decrease by 1.3% to $9.4b.
Lamb and venison farmgate prices are forecast to increase even further after a record year in 2018. Despite higher prices for most products other than beef, overall exports are forecast to fall in 2019 because of an expected 2.4% decline in lamb, mutton and beef production.
Forestry
Forestry exports are forecast to fall 0.3% to $6.4b.
This decline reflects a drop in log prices, which is thought to be mainly be due to China’s lower buying power following its weakening currency. Despite that, there continues to be strong demand for logs in China, driven by high construction activity and it is expected to offset most of the reduction in export value.
Horticulture
Horticulture exports are forecast to rise 13.1% to $6.1b.
Kiwifruit export revenue is forecast to rise 22.6%, driven by a very strong kiwifruit harvest in March/April 2018 following a poor harvest in 2017 and rising kiwifruit prices. The rest of the horticulture sector is also expected to grow 8% over the next year.
Seafood
Seafood exports are forecast to increase 8.5% to $1.9 billion in June 2019.
Demand from key markets continues to rise, helping support rising prices. Forecast growth in aquaculture production will allow higher export volumes to key markets in the future.
Arable
Arable exports are forecast to fall 3.6% to $235m.
This fall is being driven by stronger exports earlier in the calendar year from an earlier harvest. The long term outlook for arable exports remains positive, with moderate price and volume growth forecast, assisted by a weakening NZD outlook.
Other
Expprt revenue from NKZ’s other primary sector exports and foods are expected to increase to $2.7b, up 0.9%.
Increases forecast in beverages and other products, honey and live animals are expected to offset decreases in sugar and confectionery and innovative processed food exports.
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