Farming's bright future feeds new middle class

Agricultural and horticultural exports are "skating through" the world recession, according to Agriculture and Forestry Ministry head Murray Sherwin.

Releasing its annual overview of the primary industries yesterday, he said New Zealand was relatively well off compared with other industrial countries.

"I think we can continue to be confident we have a track ahead, a trend of rising prices in quality products that New Zealand can provide. That will be driven not by feeding the starving billions, but by meeting the demands out of the rapidly emerging middle classes, of Asia, in particular, but also of other parts of the world."

New Zealand was well placed to supply wholesome food. "It's safe to eat, it's nutritious and it is produced in conditions likely to be conducive to that. It's going to be delivered to spec, on time, every time. And we can have some confidence in the regulatory regimes behind it. That's a lot harder for some of our competitors to manage than you might think."

The ministry predicts dairy prices to bounce back once the recession is over and for the milk payout to stay below $6 a kg of milksolids for the next four years. Lamb returns are expected to stay up as breeding numbers fall in Europe and Australia. Crucial to its forecast of generally improving returns across the primary industries is a predicted fall in exchange rates to historical trends.

The forecasts:

Dairy: Demand is expected to remain weak for the next 12 to 18 months as economic growth falters in developing countries. The average payout for the coming season is forecast to be $5 a kg of milksolids as overseas currencies depreciate against the dollar and in following years to be $5.27, $5.78 and $5.96.

Lamb: Reduced stock numbers and a lower kiwi dollar should offset any drop in demand. The average schedule price is tipped to peak at $4.79 a kilogram next year, slip back 60c the following year and rise only gradually after that. Volumes are predicted to recover slightly after the drought years to around 330,000 tonnes.

Beef: Tough market conditions lie ahead for prime beef as consumers trade down their eating choices and disease-caused trade restrictions on rivals are eased.

Wool: The average sale price is expected to hover around $3 a kg for the next few years as the world economy slowly improves.

Deer: A slow recovery is likely as production gradually rises on the back of cautiously increasing herd numbers. Prices remain high despite the recession as European demand outruns supply.

Kiwifruit: Export revenue is tipped to top $1 billion for the first time this financial year, ending March 31, 2010, due to increased volume and favourable exchange rates and to continue to rise to $1.3b in 2013.

Pipfruit: This year's production is seen as the maximum possible, and orchards are predicted to scale back growth in years to come. However, the carton price is expected to jump from $26 to $33 over the next few years as new varieties more attractive to Asian palates come on stream.

Vegetables: Export values are forecast to increase steadily in the recession recovery and as exchange rates depreciate.

Arable: The outlook is for cereal prices to stabilise this year and next, markedly below the highs of the last two years, but above the historical average for the last decade.

Forestry: Distressed housing markets in many parts of the world had hit the amount and prices of sawn timber. Prices will possibly improve in the recession recovery. Pulp and paper prices are predicted to make a modest rebound toward the end of this year. Forestry export revenue is expected to rise slightly next year and then make more robust gains.

Wine: Export values are forecast to hit the $1b mark in 2011 as exports rise. Bulk shipments are a concern as they are lowering demand for bottled wine.

- © Fairfax NZ News