increase font size
New Zealand commodity prices are likely to feel downward pressure over the year, says ASB senior rural economist Nathan Penny.
In his Commodities Weekly report, Penny says 2019’s more modest outlook follows relatively positive prices over 2018.
The average level over 2018 was comfortably above the 10-year average in both USD (+4.7%) and NZD (+12.3%) terms.
However, economic growth in NZ’s major export market, China, is slowing, and Penny expects this slowing to lead to more modest demand for NZ’s commodities.
“Recall that China accounts for around a fifth of NZ’s overall goods exports and larger amounts for the log, dairy and sheepmeat sectors,” he says.
Moreover, NZ agricultural production is booming, with the extra supply also weighing on commodity prices.
Penny notes that in particular, spring 2018 weather was surprisingly good and the weather has continued in this vein so far this summer. As a result, agricultural production is likely to remain firm over coming months.
“For example, we expect record-high dairy production this season. Indeed with the bumper dairy production in mind, we revised down our 2018/19 milk price forecast twice late last year.”
Meanwhile, the global economy is also slowing, hinting at a broader slowing in demand for NZ export commodities. In the US, the trade tensions with China combined with rising interest rates are causing financial market volatility. While over the Atlantic, ongoing Brexit concerns are weighing on the UK and European economies.
Despite these headwinds, there are positive offsets in play, says Penny.
“First up, the NZ dollar is at a supportive level and likely to mostly stay that way over 2019. As a result, commodity prices in NZD terms, if not USD terms, are still likely to remain above long-term averages.
“Also, while overall Chinese economic growth is slowing, we expect the household sector to hold up better than the industrial and export sectors.”
One of the country's leading experts on China has praised the NZ Government for its handling of the recent incident with China over that country's cyber attack on two of our parliamentary institutions in 2021.
Hopes of NZ sheepmeat prices picking up anytime soon in the country's key export market of China looks highly unlikely.
ASB says the decision to sign on to the AgriZeroNZ joint venture came out of a wish to be a part of the solution.
An $8/kgMS farm gate milk price is still on the cards with less than six weeks left to run this season.
Zespri has unveiled the award-winning KiwiBrothersTM mascots in China for the first time to market its large kiwifruit crop.
The country’s 4200 commercial fruit and vegetable growers will vote from May 14 on a new HortNZ levy.
Meat processor Alliance Group is asking farmer shareholders to inject more capital in order to remain a 100% co-operative.
A vet is calling for all animals to be vaccinated against a new strain of leptospirosis (lepto) discovered on New Zealand dairy farms in recent years.
Dairy
Rural banker Rabobank is partnering with Food Rescue Kitchen on a new TV series which airs this weekend that aims to shine a light on the real and growing issues of food waste, food poverty and social isolation in New Zealand.
Telco infrastructure provider Chorus says that it believes all Kiwis – particularly those in the rural areas – need access to high-speed, reliable broadband.
