Tuesday, 02 February 2016 11:55

Sector outlooks: some good, some not

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Horticulture is looking good for 2016, says Proudfoot. Horticulture is looking good for 2016, says Proudfoot.

Ian Proudfoot, head of agribusiness at KPMG, gives his predictions for 2016.

Horticulture

The whole prospect for horticulture in the coming year and into the future looks really good, says Ian Proudfoot.

Kiwifruit will have another good year of very strong growth with another 12 million trays of G 3 becoming available – a huge opportunity.

"Looking beyond that there is a good story in apples and from what I am hearing the summer-fruit sector has lined up more effectively than it has done for years. Our potato industry has sorted itself out and is working more effectively. In the main sectors in horticulture there are good stories."

Beef positive

In beef, in the medium-long term there is growth potential. Prices will undoubtedly fluctuate but the long term story hasn't changed.

"There is high demand for high quality beef. The real issue for the beef sector is getting the messaging right and the quality of the product we produce and clearly differentiating it from what other people produce.

"We produce a grass-fed, hormone-free, free range product, which is the story we need to tell. More and more we are seeing people recognising the value in the NZ story of beef, and they are working out how to monetise that much more effectively than in the past."

Lamb struggling

Conversely, Proudfoot sees little change in what's happening in lamb. He expects ewe numbers to continue their present slow decline. Good and bad years will continue, depending on how much lamb is produced in NZ and the UK.

But sheep farmers will battle to get long-term, sustainable profitability.

Dairy on the ropes

Proudfoot says as a consequence of all the global issues a farmgate milk price in the range of $4-$5 is the best dairy farmers can expect this and probably next season.

At best, dairy farmers will see only a slow improvement and that will depend to some extent on the impact of the weather over the next three-four months.

Proudfoot is more concerned about the growth of the domestic market in China. He says the Chinese economy appears to be slowing much faster than people thought it would. He believes income growth will slow in China and consumers in that country and in many emerging markets may not have money to spend as we have anticipated.

It's not only the milk price that's putting farmers under pressure, but also the rules on environmental management. People know hard times are ahead and to get through them will take tight, focused management and control of cashflows.

 

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