Wednesday, 25 March 2020 10:09

Primary exports hit, but outlook strong

Written by  Peter Burke
While primary exports are expected to be hit, the sector will be more robust than many others in the wake of coronavirus. While primary exports are expected to be hit, the sector will be more robust than many others in the wake of coronavirus.

Primary sector export returns will take a $1.3 billion hit from COVID-19, but there is some good news.

The figure was revealed in the latest Ministry for Primary Industries Situation and Outlook Report.

In December, MPI were forecasting that primary exports for the year ending June 2020 would be $47.8 billion – now this has been reduced to $46.5 billion a mere 0.5% up on the 2019 total. 

MPI is warning that the future outlook is uncertain and further downward forecasts are possible.

The report states that while the geopolitical tensions on trade such as Brexit and the US-China trade war have eased somewhat, Covid-19  has added new uncertainty for NZ primary exporters. It notes that the seafood and forestry sectors have been particularly badly hit. 

But it points out, in the last month, dairy commodity prices have softened where the average price on the GDT fell 7.5%.

MPI says there has been weakness in milk powders, butter, and anhydrous milk fat. However, despite the disruptions in Chinese markets, North Asian buyers have continued to be active in recent auctions, with volumes traded higher than at the same time the previous year. 

It adds that prices for cheese and casein have continued to strengthen. 

MPI predicts that continued declines in key commodity prices will impact farm gate milk price payouts, but says – given the strength of current export prices – strong payouts are still likely and will continue to support dairy farmer profitability this season. 

It predicts an average likely payout of $7.15/kgMS.

While revenue from the dairy sector is down on the December forecast, it is still ahead of the previous year and is expected to earn about $19.2 billion in total. 

The report also notes that despite the drought in major dairying regions, milk production for the first eight months of the season was up by 0.5%.

Meat and horticulture exports are also forecast to take a hit with revenue from meat down by $220 million and horticulture by $110 million.

MPI says the meat industry has also been affected by the drought and early kills of stock have led to a shortage of cold store capacity. It also notes that some meat products are being diverted to lower value markets.

However, on a positive note, MPI believes that Chinese consumers will still require imported protein due to reduced Chinese supplies of 

pork caused by the outbreak there of African Swine Fever. 

It adds that with lower red meat exports from Australia, due the aftermath of the drought and bushfires, demand for NZ meat will continue. 

The other positive sign is that China appears to be recovering somewhat from Covid-19. 

While there still problems, there are 

signs that goods are starting to move through the ports. MPI is also forecasting that, despite fluctuations in the schedule, meat prices are likely to remain at near recent highs.

Horticultural revenue to the end of June is forecast to drop slightly on previous predictions. But at nearly $6.3 billion, it is still good with MPI expecting demand to remain strong in the long-term. Covid-19 is expected to have some impact with slightly lower prices for kiwifruit and apples.

The as yet known factor, says the report, is the fate of the NZ dollar – which has already weakened since the beginning of this year. 

MPI says should the weakening in our key agricultural commodity prices continue to worsen, they would expect further adjustments in the NZ$ to help offset some of these effects for primary sector exporters.

More like this

Sanctuary closes

A North Canterbury cow sanctuary that was investigated by Ministry of Primary Industries for alleged animal welfare breaches has folded.

Alliance pays back wage subsidy

After being dogged by claims about its entitlement to the wage subsidy, the country’s largest meat processor will now fully pay it back.

Sting in tail of non-compliance

MPI is warning sheep farmers to get up to speed with new animal welfare regulations relating to the docking of sheep which come into force at the end of May. 


Merlo goes greener

Obviously not wishing to get left behind by some of its competitors, Italian manufacturer Merlo is planning to add to its green-liveried telehandler range- with another set of green credentials in the shape of an all-new, all-electric battery-powered Merlo e-Worker model.


Growing a family legacy

What started with planting some acacia trees 25 years ago has become a multi-generational passion for the Hunt family in Te Awamutu.

Moves to improve winter grazing requirements

DairyNZ says it supports recommendations to the Government from an advisory group looking to improve winter grazing rules for farmers and achieve better environmental outcomes.


Machinery & Products

Good growth year for Claas

While many sectors of the agricultural machinery were hit by the ravages of Covid-19, the effects of the pandemic did…

Green machine frugal on fuel

According to the industry respected independent DLG PowerMix test, John Deere appears to be the best choice of tractor for…

App takes pressure off

TRS Tyre & Wheel, owned by Trelleborg Wheel Systems, has introduced the TLC Plus App to the New Zealand market.

New MF 5S series arrives

Just before Christmas, Massey Ferguson quietly released details of the successor to its popular MF 5700S range in the shape…

» The RNG Weather Report

» Latest Print Issues Online

The Hound


Your old mate reckons the nomination of the New Zealand Dairy Industry Awards (NZDIA) management team as a finalists in…

Good riddance!

The Hound reckons 2021 is off to a rollicking start with news that professional whinger and anti-farming drone Martin Taylor…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter