Great year, but it’s not forever

In its March Situation and Outlook report, MPI is forecasting a 10.8% increase in primary exports over last year, bringing earnings from the sector to $42.2 billion – nearly $6b up on last year. This is the largest annual increase since 2014. 

MPI’s director of sector policy, Jarred Mair, says the rise is due to a recovery in dairy prices, rising red meat prices and strong performances in forestry and horticulture. The only blip is in wool prices, which remain sluggish.

Lamb and beef prices are holding well with strong demand from the US, Mair says.

“Lamb hasn’t come back to the pre-GFC price and probably won’t do so for some time, but we are seeing lamb prices staying relatively strong for the near future. Because beef is more of a global product than lamb it is doing very well. We are seeing good demand for beef globally and good prices for premium cuts in the US.”

Meanwhile, Mair says beef exports to Japan are likely to be among the big beneficiaries of the CPTPP.  Despite a difficult season weather-wise, dairy exports 2017-18 will be $16.7 billion, not $16.8b as MPI predicted in December.  The report says milk production overall will be down by about 1% this season. But in Taranaki it will be down by about 9%, reflecting the “bizarre weather conditions there”. 

The report notes the continuing decline in cow numbers in dairy: since 2016 cow numbers have dropped about 220,000. But this is unlikely to impact production as farms become more efficient and better genetics are used to improve per cow performance.

“This started back in 2014 when people started to cull a bit more and then we had these rolling droughts that saw farmers drop their animal numbers,” Mair explains. 

“But now they are realising they can still produce pretty good numbers from smaller herds so we are seeing greater efficiency on farm.” 

The report warns dairy farmers that environmental policy is likely to restrict cow numbers and the amount of land available for dairying.  It predicts that growth will need to come more from productivity increases and higher value products.

Forestry has performed strongly in the past year -- log exports have risen 30% since 2015 -- but this growth may not continue due to log mills closing in China.

Mair says, predictably, that horticulture has contributed much much to the boost in primary exports and this will continue.

“All three – kiwifruit, pipfruit and wine – are doing really well. We haven’t seen the return on investment for the pipfruit sector yet because they planted two million trees over the last couple of seasons and that has still to come into production,” he told Rural News. 

“But we are seeing significant growth in kiwifruit. With the sale of new Gold licences they are projecting 7000 new hectares of kiwifruit over the next five to seven years – so really strong growth for the next decade.” 

Mair says Maori primary enterprises are also contributing more -- in both the area of land entering production and the move to higher value products by Maori companies.

But he adds a caution: the dairy industry needs to remain aware of rising milk production in the European Union, and all sectors must be aware of the threats posed by new synthetic food products.