Thursday, July 7, 2022

Forecasts revised down

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The brakes going on global growth prospects has the Ministry for Primary Industries (MPI) revising down its forecasts down for primary sector growth prospects.

The MPI has released its mid-year update on its June forecast, and by its own admission the agency’s June report was a more positive outlook for the sector.

The six monthly update now has primary export values for the full 2012-13 year pushed down 3% on its mid year forecast, at $27.5 billion.

Against last year’s bumper season this is a decline of 5%.

The key downward drivers include the International Monetary Fund (IMF)’s downward revision of growth prospects for 80% of New Zealand’s export markets, compared to six months ago.

These have been dominated by continuing uncertainty in Europe and faltering recovery in the United States.

That revision has the majority of NZ’s trading partners’ growth figures with at least 1% off their original per annum GDP growth expectations.

MPI’s head of economic analysis Chris Jones said the strengthening of the Kiwi dollar and prospects it will remain high for the next two to three years also had to be accounted for.

The agency predicts the high Kiwi will continue to sit around US.807c, an upwards revision from .788 used in the June forecasts.

That higher dollar has taken the top off the positive gains in dairy values, and continuing strength in US beef demand.

The prospects for kiwifruit remained surprisingly strong until the end of the current year.

However, there has been some upside develop for the pastoral sector since initial June predictions. The US drought in key grain growing regions has created additional beef opportunities there, and is feeding through into dairy pricing also.

“And despite the global slowdown, China is still growing strongly in absolute terms.

At 7-8% pa growth in 2012-13 it is still admirable,” Jones said.

The drought is not only a US issue now, with Russia experiencing lowered crop volumes and already EU dairy production is easing back as feed prices creep upwards.

He also pointed to strengthening dairy prices since June’s low point. Global Dairy Trade prices have moved around 17% upwards in recent months.

The MPI’s $5.54/kgMS prediction for milk price payment this season sits close to the recent revised price of $5.50/kgMS announced recently by Fonterra.

The agency expects to see international dairy prices recover over the remainder of the 2012-13 dairy season and beyond.

The uncertainties swirling around Europe however continue to dominate the sheepmeat sector.

The MPI has put its average per kg price for lamb this season at well under $5/kg at $4.88. This compares starkly to last year’s $6.37/kg.

Despite MPI’s predictions for lamb volumes to be up, it leads the meat sector’s decline in overall value of exports for the year, falling from $6.61 billion to $6.05b.

Jones cautioned that despite the more optimistic level of Chinese growth predictions, there was “still greater downside risk” due to unresolved EU debt issues and slower US growth.

He acknowledged prediction at present was a fraught business as those financial issues continued, particularly with the US having to sort out its fiscal difficulties in short time.

The wine sector held some promise of better returns, with the 13% reduction in the 2012 crop neatly offset by a 15% increase in returns for the season.

Kiwifruit prospects firm for 2013

Despite the hit Psa is making across 68% of the country’s kiwifruit orchards, MPI’s predictions are the greatest impact is still to come in the 2013-14 year.

The agency has revised its expectations of income to the sector for the 2013 year upwards from its earlier June outlook.

For the end of the 2012-13 season, export revenue is expected to total $1 billion for the year to March 31.

This is up 14% on the $880 million forecast in June, attributed to higher than expected export volumes and higher prices for Gold fruit. Total exported trays are expected to be 99 million to March next year.

However, the big hit comes the following season. MPI predictions are for a drop to somewhere between 81m and 96m trays.

Income may possibly drop to as low as $724m.

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