Stutter amid positive view
Federated Farmers sees the Government's outlook for primary sector-export revenue to decline in 2012-13 as a "speed wobble" with prospects still positive.
This view is supported by a Situation & Outlook for Primary Industries (SOPI) report by the Ministry for Primary Industries (MPI) forecasting the farm-gate contribution to gross domestic product (GDP) growing nearly 67 per cent between 2009 and 2016.
Federated Farmers vice- president Dr William Rolleston said the 2012-13 season would not be "stellar" and reflected the world economy, but the outlook was favourable.
"We are a lot better off than sheep and beef was a few years ago. I see it as a speed wobble with a long-term outcome that is positive."
Commodity prices rising rapidly over recent seasons have corrected with the global economy cooling.
Rolleston said there were some concerns with the European crisis and the soft United States economy, but the primary industry had held the New Zealand economy together.
He said New Zealand's close ties with its now second largest trading partner, China, had placed it in a good position in the medium to long term, and other parts of Asia were demanding high quality protein.
"If there are real threats, it's the future of the Chinese economy. At this stage it looks fine, but it has probably had a share of its own speed wobbles, and their central bank has put down interest rates to keep moving along. We don't want high inflation and that bubble to burst."
The advice being given to farmers is to plan for lower revenues in the short term, watch costs and budget conservatively to lower New Zealand's farm debt of $47 billion.
The report, including seafood for the first time, said primary industries were continuing to sell more produce into Asia, particularly with recessionary pressure in Europe.
Milk prices are still strong, but a drop is expected for 2012-13 because of weaker international demand and increased production in Europe and United States. Dairy production rose 10 per cent in the season just ended from regular rainfall over the summer and a larger national herd. Favourable climate and good pastures also generated more meat production.
However, lamb schedule prices are falling more than the normal seasonal decline after a record high of $137 a lamb last November. Consumers in Europe have shifted to less expensive meats, although only modest falls are expected.
Beef demand and schedule prices have held up from robust demand from Asian markets, and falls in United States and Australian production.
MPI deputy director- general Paul Stocks said primary produce prices were falling from highish levels, but in general remained favourable.
He said forecasts were based on the strong dollar continuing to hold up for some time and ultimately depreciating because of New Zealand's high level of overseas debt.
Rolleston said sheep and beef farmers were catching up on long overdue better prices and would not be splashing out on luxuries.
Primary industries at the farm gate are forecast to grow their contribution to GDP from $7.3 billion in 2009 to $12.2b by 2016.
- © Fairfax NZ News
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