Food security, trade links in NZ’s favour

In its Agriculture in Focus 2013 report – examining the outlook for New Zealand and Australian – Rabobank identifies key opportunities and challenges for the year ahead.

Overall, the report finds the outlook for New Zealand agri commodities remains generally robust, despite some ongoing challenges to competitiveness.

"Global supply and demand fundamentals indicate an increased reliance on exportable supplies from New Zealand in 2013, which should help bolster local prices, largely off-setting the currency drag (from the high dollar)," the report says.

However, the report cautions, maintaining competitiveness is vital in order to take full advantage of the opportunities. "Enhancing the international competitiveness of New Zealand agribusiness is becoming increasingly challenging. Where possible, these challenges must be tackled in 2013 to mitigate the impacts of the elevated New Zealand dollar and to unlock the growing opportunities for the sector into the future," it says.

Chief among the opportunities for the New Zealand agricultural sector are those presented by the pressing global need to provide food security to rapidly-expanding and increasingly wealthy populations, particularly in Asia.

"The issues of food security and food safety provide enormous opportunities for New Zealand and Australia's agricultural sectors," the report says. "Both countries have ample supply of high quality food and agricultural products, and comfortably sit on the doorstep of a fast-growing region."

However, extracting and retaining maximum value for that production – along with maintaining and developing competitive advantages – will be key to ongoing growth in exports, says Rabobank senior analyst Hayley Moynihan.

"The New Zealand agribusiness sector is expected to play a major role as a reliable supplier of high-quality, safe food over the next decade, however it is not the only country eyeing the opportunities presented by the increasing food demand from a rising middle class in Asia. Maintaining competitiveness is vital to take full advantage of the opportunities," she said.

Food safety is also an important factor identified by the report. "Plagued by local food safety issues, many trading partners are seeking the assurance of high quality imported food and agricultural products," Moynihan says.

"And stringent food quality and safety frameworks already underpin production systems in New Zealand."

Throughout 2013, New Zealand's strength in international trade links with key importing markets is expected to be a distinct competitive advantage for the country's agri exporters, says the Rabobank report.
"The inability of many, particularly developing countries, to feed growing populations through domestic production means that governments are aiming to facilitate trade flows and offshore investment in agriculture as a means of securing food supply," Moynihan says.
"Trade relationships and agreements are integral in developing and maintaining efficient access to global markets. The continued facilitation of trade flows to ensure stable food stocks globally in 2013 is expected to help support the local prices of agri commodities in New Zealand."

For New Zealand, a key focus is the ongoing negotiations with Russia, Belarus and Kazakhstan to form a Free Trade Agreement. The report says foreign interest in New Zealand's agricultural assets also looks set to continue in 2013, with the country's reputation for quality food production making it an attractive destination for investors.

Other key issues facing the agricultural sector in 2013 identified by the Rabobank report include the strong New Zealand dollar, increasing regulatory pressures and sector employment.
The New Zealand dollar is forecast to remain elevated for at least another 12 months, challenging the competitiveness and profitability of the country's exports, the report says.

"The elevated currency makes the pursuit of future productivity gains in New Zealand agriculture all the more critical," says Moynihan.

In addition, increasing regulatory pressures are creating some extra headwinds across the agricultural sector adding to the cost of production, as well as creating uncertainty, limiting resource availability and driving change in farming practices.

While attracting current and future generations to agriculture is a priority for all of the farming sector, Moynihan says. "The challenge is not just meeting and being able to afford immediate labour requirements to get the job done, but identifying from where the next generation of farm owners, managers and agribusiness leaders will emerge," she says.