Damien O’Connor Criticises Budget 2026 as ‘Miserable’ for Rural New Zealand
A miserable budget that didn’t deliver much for anyone.
This has been revealed in the latest Situation and Outlook for Primary Industries (SOPI) - a quarterly report produced by the Ministry for Primary Industries (MPI) which predicts annual export returns from the primary sector and provides commentary on a range of issues relevant to it.
The report says that for the year ended June 2022, earnings from the primary sector were just on $53 billion - an 11% rise on the previous year - and it predicts this will rise to $55 billion by June 2023.
To the end of June, meat and wool exports earned $12.3 billion, horticulture $6.7 billion, forestry $6.5 billion and seafood $1.9 billion.
The report was launched at the Fieldays. Agriculture Minister Damien O'Connor described the result as outstanding despite the global economic storm that is gathering.
He says accelerating NZ's export growth is a major cornerstone of the Government's economic recovery plan, and says the report shows further evidence that this plan is working. He noted that dairy remained NZ's largest export. "It's comforting to know there is strong demand for food and fibre and this points to the fact that NZ's economy remains better positioned when compared to others," he says.
Behind The Numbers
On the face of it the numbers look promising and there is no taking away from this, but the authors of the report are quick to point out that the outlook is far from rock solid.
In the first instance it points out that the recent drop in dairy, meat and forestry prices in overseas markets have largely been offset by a weaker NZ dollar. It also notes that some of the dairy revenue comes from the sale of product that wasn't sold last season.
It notes the impact of climate, especially on dairy, which has seen slow pasture growth in spring in most regions resulting in high demand for local and imported feed. It could have also mentioned the delayed planting of maize crops, some of which are barely up and some still sitting in puddles in water logged paddocks.
The report delves into some of the specific issues relating to dairy. Firstly in relation to pasture growth, it says that while it was slow at the start of the season, they predict it will pick up from now on as temperatures rise and paddocks dry out. It forecasts that milk production will pick up some of the lost ground.
In terms of farm gate returns, MPI is predicting an $8.95 kgMS for this season but adds that dairy farm input costs have risen by 17% in the year ended September 2022. It says the decline in the milk price and the increasing input costs are likely to “constrain farm profits this season”. The other headwind is the weakening demand for dairy globally in recent months, driven mainly by decreasing demand from China.
The China factor must be a worry for the dairy sector given its high dependence on it. The ongoing Covid issue there remains a threat and creates uncertainty, as the does the war in Ukraine – the latter being seen as a destabilising factor in terms of the global economy. And then there is inflation both here and overseas. The outcome of this, says MPI, is that consumers have less disposable income, which is affecting demand for goods and services.
To sum up, the news is good, but one could say the difference between good and bad is paper thin and a combination of good management and a little bit of luck will be necessary for the good times to continue.
