Good vibes
OPINION: Mystery Creek Fieldays was a more positive affair than many expected, given the headwinds facing farmers lately.
Except for horticulture, New Zealand’s main primary exports – namely dairy, meat and wool and forestry - are in for a bumpy ride in the coming 12 months.
That’s according to the latest Situation and Outlook for Primary Industries (SOPI) report, produced by the Ministry for Primary Industries and released at the National Fieldays last week.
For the next 12 months, starting July 1, MPI is forecasting that overall export returns for the next year will be down by 5% to $54.5 billion on last year’s record $57.4 billion. But MPI is expecting things to get better a year or more later and return to the highs of 2023.
The SOPI report is a quarterly snapshot of the market outlook for the primary sector, and it attributes the problems coming in the next 12 months to slower global growth – especially in our key export market China. It also notes that higher global production from other countries will dampen export prices. This news is not exactly unexpected and for several months, predictions of a bad year ahead have surfaced on a regular basis.
On the home front, the SOPI report says farm input costs will remain elevated in 2024-25 putting a squeeze on farm profitability although it says that some help for farmers has come with a 7% drop in fertiliser prices.
But at a high level, NZ’s dependence on China remains probably the biggest challenge – for dairy, meat and fibre and forestry, but not so much horticulture. The SOPI report says while the Chinese economy grew slightly in the past few months, consumer demand there remains weak. But the report says running counter to that, large emerging economies are performing well, and that global trade is forecast to rebound.
Looking at individual commodities, the report shows that export returns from dairy products in 2024 will drop by 7% to $24.1 billion and will take another two years before they return to the record 2023 numbers. It says this is due to a weakening of global demand and an increase in supply globally including increased Chinese production. The report also notes the volatility the sector faces and points to the fact that this is reflected in the fact that farmgate milk price has been revised upwards and downwards by Fonterra.
Meat and wool exports will take a tumble this year and are forecast to be down by 6% to $11.4 billion. Taking the biggest hits are mutton and wool prices with neither expected to bounce back in the coming years. Lamb returns are down and predicted to take at least four years to return to what they were in 2023.
However, beef prices will take a small drop in 2024, but the future looks much better with beef returns forecast to hit close to $5 billion in 2028.
Forestry exports will face a 7% drop in 2024, but the long-term trend is positive.
The star of the SOPI report is undoubtedly horticulture, which despite all the adversity it has suffered with adverse weather events is expected to make a modest 1% increase in 2024 but is predicted to jump a massive 13% in 2025. This is due to stand out performances by the kiwifruit and apples and pears sectors. Interestingly, horticulture is creeping up to challenge meat and wool as the number two export earner. By 2028 meat and wool will hit $13 billion, while horticulture will be close to $10 billion.
While returns for the most part will be down on 2023, it should be remembered that this was a record year anyway and so the overall picture is far from gloomy. The big question mark is what will happen with China and what other geopolitical events are in store.
As storms and flooding continue to batter the East Coast, the Insurance & Financial Services Ombudsman has issued advice for those impacted and looking to claim with their insurer.
Federated Farmers Gisborne/Wairoa president Charlie Reynolds says farmers are in need of emotional support after rain, wind and flooding hit the region this week.
Minister for Emergency Management Mark Mitchell says the Mayoral Fund has been triggered, activating $300,000 for regional recovery after severe weather hit the East Coast this week.
States of Emergency have been declared in Haumoana, Wairoa and Hastings after storms have once again battered the East Coast of the North Island.
Dairy processors are happy with the Government’s move to reduce redtape for exporters.
The fortunes of the dairy industry are expected to bounce back in about a year’s time, according to the Director General of the Ministry for Primary Industries (MPI), Ray Smith.
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