Overview of baseline projections
Exchange rates
The exchange rate outlook continues to be dominated by the strength of the New Zealand dollar (NZD) against the currencies of our major trading partners. This is especially true against the United States dollar (USD), where the exchange rate assumptions over the outlook period from 2003/04 to 2006/07 are significantly higher (6 - 18 percent) than those used in SONZAF 2003.
The value of the NZD against all of the major world currencies (the USD, the Euro, the yen, the Australian dollar (AUD) and the British pound (UKP)) is assumed to have peaked in the March quarter of 2004, and to slowly depreciate over the outlook period.
Prices and production
The outlook for world prices for the main export products (annual average, in foreign currency terms) is somewhat variable. The following trends are projected over the outlook period:
- dairy product prices are projected to generally rise, with the exception of butter, which falls from 2005/06 onwards;
- beef and lamb prices are projected to fall in 2004/05, and then recover;
- wheat prices are projected to fall.
For products where prices (annual average) are measured in NZD free on board (FOB) terms, the following trends are projected:
- venison, velvet, apple and wine prices are projected to rise,;
- wool and kiwifruit prices are projected to fall in 2004/05, and then recover;
- forestry product prices are projected to generally rise, with some minor fluctuations over the outlook period.
Farmgate or schedule price trends (annual average, in NZD) over the outlook period are as follows:
- apple, venison and poultry prices are projected to rise;
- beef, lamb, and kiwifruit prices are projected to fall in 2004/05, and then recover;
- milksolids prices are projected to fall to 2005/06, and then recover;
- wheat and pig meat prices are projected to fall.
For most products, the quantities produced are projected to generally increase over the outlook period. The main exceptions are beef, velvet and venison, where production is projected to fall.
Exports
Over the outlook period the total export value of pastoral agriculture, horticulture and forestry (in March years) is projected to increase by $3.40 billion (20 percent) to $20.2 billion. The largest contributors to this increase are dairy (up $1.52 billion (25 percent) due to higher volumes and prices) and forestry (up $1.14 billion (41 percent) largely due to increased lumber volumes and prices).
Meat export value is projected to increase by $49.2 million (1 percent) as higher prices for lamb and beef are offset by lower beef volumes. Wool export value is projected to increase by $28.6 million (4 percent) due to higher prices. Total horticultural export value is projected to rise by $608 million (29 percent), principally due to increases in wine volumes which are projected in increase nearly 300 percent over the outlook period.
By the end of the outlook period, dairy will continue to be the largest export earner of the land-based primary sectors (38 percent of land-based primary sector export value), followed by meat (21 percent) and forestry (19 percent).
Gross agricultural revenue and contribution to Gross Domestic Product
The agricultural sector's contribution to Gross Domestic Product (GDP) (at farmgate) rises by 0.4 percent over the outlook period, from $7.54 billion to $7.57 billion.
Contribution to GDP is calculated as gross agricultural revenue at farmgate less intermediate consumption (farm/orchard expenditure on inputs, such as fencing wire). Over the outlook period gross agricultural revenue is projected to fall by $112 million (0.8 percent) from $14.8 billion in the year to March 2004 to $14.7 billion in 2007. Intermediate consumption is projected to fall by 2 percent from $7.24 billion to $7.10 billion.
The main changes in contribution to gross agricultural revenue over the outlook period derive from:
- dairy (down $394 million, or 8 percent);
- cattle (down $372 million, or 23 percent); and
- sheep meat (up $358 million ,or 21 percent).
Contact for Enquiries
Monitoring and Evaluation
PO Box 2526
Wellington
New Zealand
