Dairy exports lifted in November. Photo by Sally Rae.
Dairy exports lifted strongly in November but that was
not enough to stop a further deterioration in New Zealand's
merchandise trade figures.
Statistics New Zealand figures showed the November trade
deficit was $700 million from a revised $666 million in
October. In seasonally adjusted terms, the monthly trade
deficit widened from $201 million to $282 million. The annual
trade balance jumped to a deficit of nearly $1.5 billion from
$1.4 billion in October.
Westpac economist Nathan Penny said the boost to the trade
data from last season's bumper agricultural production
appeared to have cleared. The deficit had averaged around
$200 million since August last year.
''Over the next 18 months, we expect that increasing
Canterbury earthquake-related imports - construction
machinery and equipment - will dominate improving export
prices. As a result, the trade deficit will widen over this
Weather patterns had returned to normal over summer after an
encouraging start to the agricultural season, he said. Dairy
production was expected to be around 2% to 3% higher this
season compared with last.
Mr Penny expected dairy prices to rise and export values to
trend up, but not enough to offset growing imports.
However, the ASB commodities weekly released yesterday showed
that Oceania dairy prices for the start of this year were
mostly below those experienced at the beginning of 2012.
Quoting the US Department of Agriculture, guest ASB dairy
commentator William Bailey said the report also showed
European butter prices followed a similar pattern, although
powder prices started 2013 well above those seen at the start
of last year.
The most recent results of the Fonterra auction showed the
average winning price for the first auction of 2013 was 8%
below the start of last year. Skim milk powder prices started
the year at their highest average since July 2011.
Some analysts expected prices to remain firm, with more
potential for price increases than decreases, Prof Bailey,
from the Western Illinois University, said.
The analysis focused on a ''very slight'' increase in
available world dairy supplies over the next 12 months, with
continued strong demand from a broad range of countries, led
India, the largest producer of milk in the world, was
expected to produce more than 133 million tonnes of milk for
the 2012-13 season. That was a nearly 4% increase from last
year and put that country on track to meet the reported goal
of seeing production of 191 million tonnes by 2020.
Most US government farm programmes, including some dairy
programmes, were extended until September 30 this year during
the final session of the US Congress for 2012, Prof Bailey
With a new Congress now in place, the whole legislative
process would need to be repeated for a new farm Bill to be
''What is different this time is the greatly increased
attention to areas where government spending might be
reduced. Farm programmes are at the top, or very near the
top, of many policy watchers' lists of programmes that could
be eliminated,'' he said.
ASB senior economist Jane Turner said that for the week to
January 4, New Zealand dollar commodity prices edged lower as
a result of an appreciation in the New Zealand dollar. At the
same time, global commodity prices actually increased, driven
by higher meat and forestry prices.
The NZX Pasture Growth Index showed a decline in pasture
growth potential in light of the hotter and drier conditions.
While heavy rain across the South Island more recently
improved soil moisture levels in the region, milk supply was
disrupted as milk tankers were unable to reach some dairy
farms, she said.
The reduced forestry supply from Russia and Canada had
supported Chinese demand for New Zealand log exports. Those
supply constraints had underpinned an increase in log prices.
The recovery in the US housing market was also expected to
provide support for global log prices in the coming year, Ms