Saturday, March 30, 2024

Outlook rosy but uncertainty rising

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In a global environment characterised by increasing uncertainty the primary sectors are continuing to deliver, Agriculture Minister Damien O’Connor says.
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Joined by 100 farmers and industry leaders at the National Fieldays O’Connor launched the latest Situation and Outlook report for Primary Industries (SOPI) produced by MPI.
“It’s great news across the sector with headline figures showing continued growth.”
Agricultural exports have risen $7.5 billion in the last two years but returns are expected to soften his year before growing again, O’Connor said.
Export returns for primary produce in the year to June 30 are expected to be $45.7b.
The report also predicts a slight fall in the coming year before returns start climbing again, to reach $48.5b in 2023.
“Horticulture has continued to be the star performer with its focus on the customer resulting in its success,” O’Connor said.
“The meat sector is solid and is likely to continue that way given the challenges in China with their pork production.
“We’re also seeing aquaculture grow which is a real positive.
“But farmers can’t assume those commodity prices will continue to stay up unless we co-ordinate and collaborate our sales efforts.
“And farmers must still work hard to make sure they get a good profit.”
Despite economic and political uncertainty affecting world markets, New Zealand’s returns have remained solid and though there is continuing risk it is offset to some extent by the weak dollar.
“This export performance by NZ’s primary sector producers is all the more impressive considering the weakening global economic environment and the high degree of uncertainty creating tensions across international markets,” MPI director-general Ray Smith said.
However, given the uncertain international backdrop and despite strong export performance the downside risks to the forecast are heightened over the next few years.
Production and returns are expected to fall slightly in the next year before resuming moderate momentum in the medium term in meat, dairy and horticulture.
Sustained Chinese and southeast Asian demand is supporting strong prices and the weak dollar is expected to continue supporting export returns.
“Strength in prices supported by an increasing proportion of higher-value products is expected to sustain growth in dairy export revenue despite constraints on milk production growth,” Smith said.
“NZ’s current run of export success over the past two years has occurred despite a rising sense of uncertainty in global markets.
“This is in part because the products we trade in haven’t been directly affected so are and in part because the NZ dollar has fallen over the past two years.
“However, these issues do provide an increasingly uncertain backdrop to the otherwise positive outlook.”
The clouds include slowing global economic growth expectations, rising protectionist sentiment and uncertainty caused by Brexit, United States-China trade tensions and outbreaks of African swine fever.
But the bigger concern for NZ is their potential impact on consumer demand in Britain, America and China.
“We are moving into challenging economic environments and trade is being kicked around like a football,” O’Connor said.
“Our sector shouldn’t assume anything and will need to co-ordinate and collaborate our efforts offshore, ensuring the rules of trade are adhered to and continuing to produce better quality products for high-value customers is the only way we are going to succeed in the long term.”
On the plus side the Comprehensive and Progressive Trans Pacific Partnership has the potential to deliver $222 million of tariff savings and open new export destinations.
“Tariffs were reduced immediately for some of the sectors and clearly the opportunities in horticulture have been taken up by people,” O’Connor said.
“It’s one positive step forward to a better international trade environment.
“It doesn’t solve everything but it’s been a huge boost in opportunities for people.”
Primary produce exporters must ensure they have contingency plans for Brexit because of the wide range of outcomes possible, including a no-deal, O’Connor said.
“NZ needs to negotiate with the European Union and with the United Kingdom and both of those negotiations will be challenging given the uncertainty around Brexit.
“We’re hoping to be one of the first countries, if not the first, to sign trade agreements with the EU and the UK once they sort Brexit out.
“Farmers need to consider the mixed farm operations that give them a number of different income streams to manage the volatility and disruptions that will inevitably occur into the future.”

MORE:
Listen to Farmers Weekly journalist Luke Chivers speak to Agriculture Minister Damien O’Connor about the Situation and Outlook for Primary Industries report at National Fieldays.

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