May SONZAF Update
This Update to the December 2004 Situation and Outlook for NZ Agriculture and Forestry (SONZAF 2004) is a concise summary of the major issues and trends, the current situation and the medium-term outlook for the main industries in agriculture and forestry.
In a nutshell:
- The export value of pastoral agriculture, horticulture and forestry products increased by five percent in the year to March 2005, driven largely by increases in lamb and beef export prices.
- The total export value of pastoral agriculture, horticulture and forestry products is projected to increase by 25 percent (NZ$4.3 billion) from 2004 to 2008. This will take the total export value from $16.9 billion in 2004 to $21.2 billion in 2008. The largest contributors to this increase are forestry (up $1.70 billion) and dairy (up $1.15 billion), with both up due to higher volumes and export prices.
- Despite overall meat export value being projected to rise by 10 percent from 2004 to 2008, driven largely by increasing lamb exports, the report projects only a slow growth in beef export value, driven by higher prices as volumes fall from 2005 onwards.
- In spite of current low prices, wool export values are projected to rise by $54 million from 2004 to 2008, due to higher export prices.
- The total value of horticultural exports is expected to rise by $740 million as a result of strong wine volume increases.
- Agriculture's farmgate contribution to NZ's Gross Domestic Product (GDP) is projected to increase by $1.17 billion (14 percent), from $8.11 billion in the year ended March 2004, to $9.28 billion in the year ending March 2008. Significant increases in contribution are projected for sheep meat, and dairy (milk production), agricultural services, fruit, nuts and oil seeds.
Summary by Sector
Dairy Industry Outlook
Milk solids production and dairy product export volumes fell in the 2004/05 dairy season, due largely to unfavourable weather conditions and inventory retention by Fonterra. Over the outlook period out to 2007/08, milk solids production and dairy products manufactured and exported are projected to rise. International dairy product prices reached near record levels in 2004/05. However, the high value of the NZ dollar against the United States (US) dollar constrained the increase in payouts to farmers. Payouts are forecast to be lower throughout the outlook period, due to higher exchange rates and lower international dairy products prices.
Beef Industry Outlook
Beef breeding cows and total beef herd numbers have continued to decline. However, beef production in NZ has not shown the same reduction, as increasing quantities of beef are being sourced from the dairy herd. International beef prices increased in 2004/05 (year ending September) partly due to the market disturbance caused by the discovery of Bovine Spongiform Encephalopathy (BSE) in cattle in Canada and the US. Schedule prices received by NZ beef farmers are expected to rise slightly this season (2004/05) but fall in the 2005/06 year, before rising again over the rest of the outlook period.
Lamb Industry Outlook
Lamb production for the year ending September 2005 is estimated to be higher than the previous year. Production is forecast to rise further over the outlook period and export volumes are forecast to follow production trends. International lamb prices are projected to remain strong over the outlook period because of falling sheep numbers in the United Kingdom and the wider European Union. In the year ending September 2005, the lamb schedule price to farmers is projected to rise. The schedule price is expected to fall in 2005/06, and rise again through to 2007/08.
Total wool sales and exports are expected to increase over the outlook period as sheep numbers rise. The average auction price for wool fell significantly this season due to the strength of the NZ dollar. Over the outlook period, auction prices for strong wool are projected to rise steadily as the NZ dollar depreciates and world demand for carpet wool strengthens.
Forestry Industry Outlook
Weak export markets, coupled with high shipping costs and a strong NZ dollar, have caused some log exporters to drastically cut back export volumes to ease costs. In addition, some forest owners have reduced their levels of harvesting to increase the age profile of the forests. With no new mills envisaged during the outlook period, capacity constraints mean that pulp production is expected to remain stable. Volumes of all forestry export products are projected to increase over the outlook period, with the exception of pulp and paper products. Export prices for all forestry products, except lumber, fell in the year to March 2005, some for the second year in a row. Export prices for all products are projected to increase over the outlook period, partly due to the assumed depreciation of the NZ dollar.
Horticulture Industry Outlook
Record kiwifruit production was achieved in the year to March 2005, and production is estimated to be only slightly lower in the year to March 2006 due to favourable growing conditions. Orchard gate prices for the year to March 2005 fell from very high levels in the previous year, and are expected to remain low over the outlook period.
The 2005 grape harvest (year ended June 2005) is estimated to produce NZ's second largest grape vintage ever, down slightly from the record vintage of 2004. Production is expected to continue to expand as new plantings mature. Export volumes for the year ended June 2005 are estimated to be up 57 percent on the previous year. Another large vintage should see export sales continue to increase in 2006. Export volumes in the medium term will continue to increase as wine production expands. Export prices have fallen for the third consecutive year as the NZ dollar has appreciated. Over the outlook period, export prices are projected to rise as the NZ dollar is assumed to depreciate.
Apple production in 2005 (year ended December) is estimated to return to a more manageable level following last season's bumper crop. The smaller export crop results from an "off" year in the biennial bearing of some apple varieties, hail damage, and wind rub resulting from strong winds experienced in November and December 2004. Total production is projected to rise in 2006 and then decline marginally over the remainder of the outlook period. Over the outlook period, production increases from new plantings are expected to be negated by lost production as some growers leave the industry due to poor profitability. Export prices for 2005 are projected to increase marginally, reflecting the benefit of managing a smaller export crop. Steady increases in export and grower price are projected to the end of the outlook period.
The full report can be found on the MAF website at: http://www.maf.govt.nz/mafnet/rural-nz/statistics-and-forecasts/sonzaf/index.htm |
Contact for Enquiries
The Ministry of Agriculture and Forestry
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 00 83 33
Fax: +64 4 894 0720
Contact this person
