Wednesday, 19 June 2019 10:55

Are we too dependent on China?

Written by  Pam Tipa
ANZ rural economist Susan Kilsby. ANZ rural economist Susan Kilsby.

Is New Zealand becoming too reliant on China as a customer for primary product exports?

Everyone is asking this question, says ANZ rural economist Susan Kilsby.

“The way I see it, yes we are selling a lot into one market. But it is a massive market with a lot of different moving parts in it,” she says. 

“So it is a little bit like selling into Europe – there are many different religions or cultures…. There’s a lot of differentiation within China.” 

Kilsby was commenting to Rural News on the latest ANZ Agri Focus Report entitled ‘Fine China or Fragile China?’.

She says NZ needs to be exposed more to Asia than to the developed markets because the economies in Asia are growing much more rapidly.

“So being exposed to Asia is a really good thing. It would probably be great if we were exposed to a few more countries to a greater degree than we are. But if we weren’t as exposed to China as we currently are the return back to farmers wouldn’t be as good.”

Kilsby adds that despite the warnings sounding about the global economy for a while, it is perhaps not impacting us so much here in NZ because we still have strong demand for our products. 

She also says that after the Global Financial Crisis we did not have the impact on our economy that many other economies had.

“We grew our exposure at that point to China which was growing rapidly while the global economy was not as strong. 

“We are reasonably well positioned at the moment, being exposed to Asia. It doesn’t come without its risks and some of that is regulatory and [some of it] access into China. It can flip on a dime for certain products. But it has certainly paid off for us so far.”

Kilsby says farmgate returns are quite strong across all sectors currently with the only headwinds being less certainty in the global economic situation. “There is never a whole lot of certainty but less at the moment with the majority of the major economies across the world slowing a little…. Lower GDPs and as a result central banks cutting interest rates to stimulate economies.

“But certainly from markets we are selling into at the moment we are still seeing good returns across the board.”

For the meat industry, many of those returns have been driven by diverting more product -- lamb and beef -- into China. In China, chain restaurants specialising in beef are growing in the big cities.

The Agrifocus report says the projected milk price of $6.25-$7.25/kgMS for the 2019-2020 season is more conservative than expected, but there are signs this will increase in future.  

“Milk prices for the coming season are on track to be stronger than the current season,” Kilsby says.

“Demand could be impacted by slowing global growth but global milk supply is expected to be contained which should support strong prices in the year ahead.”

NZ beef exports have held up well through the peak processing season, and beef exporters are benefitting from two strong markets: China and the United States. 

Investment in horticulture continues as returns from apples and kiwifruit outperform the rest of the sector.

 A strong start to the kiwifruit season has resulted in record export returns and for the first time gold fruit is expected to outperform green.  

“We’re seeing an increase in gold kiwifruit as more orchardists convert from green to gold,” Kilsby says.  

“Gold fruit matures earlier than green and it yields well which helps drive higher returns. While all gold has been picked the green harvest continues.”

More like this

Is China back?

There was a silver lining to the fourth straight drop in global dairy prices last week: demand in China is recovering.

Synlait Milk concerned with Covid-19 

Independent milk processor Synlait says Covid-19 has so far had no impact on its financial performance, however the processor remains greatly concerned.

Featured

Times will get better for deer sector

While the deer industry faces several challenges in the short term, there will be a strong rebound in New Zealand venison sales once global demand recovers.

 

Animal health problems loom

Animal health and welfare issues are likely to emerge soon as Hawkes Bay farmers try to cope with the effects of what is believed to be the worst drought in the history of the region.

Saving stock worth it for farmer

Central Hawkes Bay sheep and beef farmer Craig Preston has spent a huge sum of money buying feed for his stock rather than sending them off to the works – but says it’s worth the money. 

» The RNG Weather Report

» Latest Print Issues Online

The Hound

Dirty water

The Hound understands that Federated Farmers has been cut out of the information loop, for the past year, on the…

Who’s paying?

Your canine crusader noticed a full-page ad recently run in a farming paper calling on meat companies SFF and Alliance…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter

Popular Reads

Drop in payout looms

Dairy farmers are being told to brace for a big drop in milk payout next season.