Wednesday, February 21, 2024

Agri exports set for record returns: SOPI report

Neal Wallace
Food and fibre global sales accounted for almost 82% of all NZ trade.
A bumper wine selling season helped lift total horticulture revenue 2% to $6.9 billion. Photo: NZ Winegrowers
Reading Time: 3 minutes

Food and fibre export revenue is on track to increase 6%, with forecasts of reaching a record $56.2 billion by the end of June, driven by large increases in dairy, horticulture and seafood.

Releasing the latest Situation and Outlook for Primary Industries report for the year to June 30, Agriculture Minister Damien O’Connor said that performance was despite summer storms and the global legacy of covid.

Exports from the sector accounted for 81.8% of all trade and 10.7% of GDP for the year to March 31.

Dairy was the strongest performer for the year, generating $25.1bn in export receipts, up 14% on a year earlier due to strong sales of infant formula and sales of inventory held from the previous year.

This performance was achieved despite a 0.2% decline in milk volume.

Earnings from meat and wool dipped 3% to $11.9bn due to the impact of the covid lockdowns in China and tighter household budgets globally.

After a strong 2021/22 season, the report notes, average sheep and beef farm profits before tax for the current season are expected to fall 31%, driven by higher costs and lower returns.

Lower Chinese demand and Cyclone Gabrielle drove a 1% decline in forestry revenue to $6.5bn.

Log export returns, which account for 50% of total export values, eased 5% due to that softer demand.

A bumper wine selling season helped lift total horticulture revenue 2% to $6.9bn, offsetting lower returns from kiwifruit, apples, avocados and vegetables.

Consumer demand for fresh New Zealand produce and wine remains strong, but the report notes unfavourable climatic conditions and extreme weather affected several North Island growing regions, reducing crop volumes and revenue.

Returns from seafood rose a significant 8% to $2.1bn but arable returns eased 3% to $245 million due to lower demand for ryegrass seed.

The grain harvest is expected to be 8% higher for the year to March 31 2023, driven by increases in milling wheat, malting barley, feed barley and milling oats. 

Exports of processed food were up 6% at $3.4bn, boosted by demand for food ingredients and chocolate.

The ban on live animal exports will result in a 9% decline in revenue from this sector for the coming year.

China is easily NZ’s largest destination, with sales for the 2022-23 year of $19bn, accounting for 34% of all sector exports.

This was followed by the United States at $5.8bn, or 10%, and then Australia at $4.8bn, 8%.

China was our largest destination for dairy, taking 34% of exports, meat and wool 37%, forestry 54% and seafood, 36%.

The cost of Cyclone Gabrielle was estimated at $2bn to $2.4bn from physical damage and loss of production, with apples and pears the hardest hit at about $900m followed by forestry at $400m.

Looking ahead the report forecasts total export sales from the sector from 2023 to 2027 to grow from $56bn to $62bn.

Over the same period, the report forecasts dairy export revenue to grow from $25bn to $28bn, but meat and wool is forecast to be steady at about $11.9bn over the same period.

Forestry revenue is picked to grow from $6.5bn to $7.3bn, horticulture $6.9bn to $8.6bn, seafood $2bn to $2.3bn and arable $245m to $260m.

The NZ-UK free trade agreement came into effect on May 31 and the report notes it will rapidly reduce tariffs to lower in-market prices and enhance NZ’s competitiveness.

Looking ahead to next year, the report warns the global risk of financial instability has increased, global inflation remains above target but central bank activity on interest rates is starting to dampen inflation.

Farm costs will ease but remain high while the labour market will remain tight. The reopening of China will boost economic activity, especially for food and fibre exporters.

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