Thursday, February 22, 2024

Sector looking at 5% revenue drop this financial year

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Global economic headwinds are expected to contract primary sector export earnings this year by 5%, temporarily pausing six years of $11 billion in cumulative export growth from the sector.

The latest Situation and Outlook for Primary Industries report from the Ministry for Primary Industries said export revenue has grown from $46.3bn in 2019 to $57.4bn in 2023, boosted by an 8% increase in the year to June 30 alone.

However, price correction and weak global consumer demand are expected to ease revenue 5% in the current 2023-24 year to $54.3bn before returning to growth in 2025.

Agriculture Minister Todd McClay said mid- to long-term prospects remain strong.

“Regardless, it is a strong result against a backdrop of challenging times and is a testament to the ongoing hard work of farmers, growers, fishers, foresters and processors.

“It’s been a tough few years for NZ’s food and fibre businesses.

“High domestic inflation rates, high interest rates, workforce shortages, adverse weather events, increasing business input costs, combined with geopolitical tensions and supply chain challenges, have put continued pressure on the sector.”

He said the government is committed to doubling the value of primary sector exports in 10 years through new and improved existing trade agreements. 

The report notes that the food and fibre sector outperformed expectations in the year to June 30, boosted by returns for dairy, horticulture, seafood, arable and processed food, which offset sagging returns for meat, wool and forestry.

Export returns for dairy, meat, wool and forestry are all expected to fall in the coming year due to a price correction and lower volumes.

Revenue from dairy is picked to fall 7%, meat and wool 5%, forestry 9%, and horticulture 1%.

Export revenue from arable, seafood, kiwifruit, apples and pears and cherries is forecast to grow despite these headwinds.

“Growth in these sectors is driven by firms working in niche markets to deliver high-value products as well as strong demand and prices for fruit and seeds.”

In the 2022-23 year, dairy export revenue grew 18% to $26bn but meat and wool fell 2% to $12bn, which followed a 19% increase the previous year.

Forestry revenue fell 3% to $6.3bn, but earnings from horticulture, which is a larger earner than forestry, grew 4% to $7bn.

Export revenue from arable and processed food and other products both grew 8%, to $272m and $3.4bn respectively.

China was again the dominant market for dairy, taking 35% of exports, 38% of meat and wool, 54% of forestry and 36% of seafood.

The United States took 17% of horticulture exports and China 14%. The European Union is New Zealand’s largest destination for arable at 46%.

Of the $57bn in export receipts earned by the sector, dairy accounted for 45%, meat and wool 21%, horticulture 12% and forestry 11%.

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