Ray Smith: Dairy still has growth potential despite flat export outlook
Ministry for Primary Industries (MPI) Director General Ray Smith believes there is potential for an increase in dairy farming in New Zealand.
The Ministry has released the annual Situation and Outlook for Primary Industries report, which includes seafood for the first time.
Primary produce prices are falling from relatively high levels, but in general they remain quite favourable, says MPI deputy director-general Paul Stocks.
"Production this past season has generally been good – even great for some – due to favourable climatic conditions.
"Primary industries are continuing to sell more into Asia. With recessionary pressure in Europe, the trend towards Asia has turned into a stampede."
The exchange rate has been at a high level for a while, he notes.
"We've based our forecasts on an expectation that it will continue to hold up for some time, but ultimately depreciate due to New Zealand's high level of overseas debt."
By sector:
Dairy production increased significantly in the season just ended (year to May 31, 2012) – 10% overall - as a result of regular rainfall over the summer and an increase in the herd. The milk price is still strong, but for 2012/13 a drop is expected due to weaker international demand and increased production in the European Union and United States.
This year, favourable climate and pasture conditions have increased meat production in New Zealand.
Lamb schedule prices are falling back faster and further than the normal seasonal decline after a record high of $137 per lamb in November 2011. This is because price-conscious consumers in Europe have shifted to less expensive meats. Some further falls are expected, but these should be modest because of lower stock numbers here and overseas.
Beef demand and schedule prices have held up because of robust demand from Asian markets, and falls in US and Australian production.
Horticulture has faced more challenging conditions over the past year, due in part to its greater exposure to the European market.
These industries did not gain the high prices in overseas markets that others did this past season. Gold kiwifruit production this year has fallen due to the impact of the vine disease Psa, especially around the Te Puke area. The 2012 wine vintage is down, and this is expected to provide some lift in prices from the current low levels.
Record volumes of logs were harvested from commercial forests during 2011/12. A large proportion went overseas in the form of raw logs, due to strong demand from China. Export log volumes are not expected to increase over the forecast period.
High log prices have continued to put pressure on the New Zealand timber processing industry. This, coupled with weaker demand from traditional export markets like the US, resulted in profit margins being squeezed.
Seafood prices are holding up despite global economic conditions, due to strong demand out of China and Australia. Wild capture volumes are stable but aquaculture production is expected to increase in the medium term.
