Trade surplus heading for $1b
The export sector is set for a record-breaking year after a golden trade surplus of $818 million in February on booming exports of milk powder, logs and sheep meat, especially to China.
The trade surplus was better than the average market forecast of $600m and continues a strong run of trade figures dating back six months.
China is the key factor, gobbling up dairy products at much higher prices than a year ago, as well as more meat and forestry products.
Trade figures out yesterday showed the biggest February trade surplus so far, with exports worth $4.55 billion far outweighing imports of $3.73 billion.
With strong dairy production and high commodity export prices, the annual trade surplus was expected to top $1 billion soon, for the first time in three years, according to Infometrics economists.
Exports in February alone were up $663m, or 17 per cent higher than the same month a year ago.
Milk powder, butter, and cheese exports alone increased by $433 million or 38 per cent on the same month last year, with volumes down slightly on last year.
The rise was led by whole milk powder, up $315 million.
Logs and wood jumped by $98 million, to be 37 per cent up on February last year.
Meat exports, led by sheep meat, were $92m higher, a rise of 17 per cent. Goods exports to China rose $388 million, a massive 49 per cent leap.
For the February year, China accounted for almost $11 billion of exports from New Zealand.
"China has a seemingly insatiable demand for protein and only has a relatively limited ability to expand domestic production of these items," Infometrics says, with high demand for protein imports expected to carry on.
After the strong rise in dairy prices, dairy export volumes are up too, as production cranked up in response to the sky-high prices, ASB Bank economists said. That had translated into ongoing dairy export strength.
But the strength is across the board, with forestry exports hitting a new high and meat exports at their strongest since 2011. Exports were on a roll and annual trade surpluses were expected to carry on through the year.
"All up, 2014 is set to be a record-breaking year for the export sector," ASB said, with demand for New Zealand's commodities extending its amazing run well into this year.
Nationwide dairy production was expected to be more than 10 per cent higher this season than a year ago, implying export volumes would remain strong for the first half of the year.
Bank of New Zealand economist Doug Steel said the China-led export boom carried on in February, and was broader than just dairy products, with the prospect of more good news ahead, but with some risks. International dairy prices had started to head down.
Meanwhile, the Government's goal of growing two-way trade with China to $30 billion by 2020 looked "achievable", Steel said, after goods trade in the February year hit $19.2 billion. The trade in services was probably worth another $2 billion in the past year.
In February, the value of imported goods rose by $277 million, or 8 per cent, to $3.7 billion.
Record February trade surplus: $818 million ($432m February 2013)
February exports: $4.55 billion, up 17 per on February 2013
February imports: $3.73 billion, up 8 per cent on February 2013
Annual trade surplus: $649 million (previous $264m)
Why are exports so high?
China is the key
Dairy prices are high and more recently export volumes have cranked up
Dairy production forecast to be up 10 per cent on last season
Forestry exports at fresh highs
Meat exports at their strongest for three years
Source: Statistics NZ & ASB
The Dominion Post