Agriculture depends on trade links

An increasing global focus on food security, along with strong trade links, are the key to future competitiveness of New Zealand agriculture, a newly released industry report says.

In its Agriculture in Focus 2013 report, Rabobank identified key opportunities and challenges for the competitiveness of agricultural commodities in the year ahead.

Overall, the report found the outlook remained ''generally robust'', despite some ongoing challenges to competitiveness.

Global supply and demand fundamentals indicated an increased reliance on exportable supplies in 2013, which should help bolster local prices, largely offsetting the currency drag from the high dollar, it said.

However, the report cautioned that maintaining competitiveness was ''vital'' to take full advantage of the opportunities.

Chief among the opportunities were those presented by the pressing global need to provide food security to rapidly-expanding and increasingly wealthy populations, particularly in Asian economies.

Like Australia, New Zealand was well placed to increase the volume of agricultural exports to Asia, due to its competitive advantages, including superior product quality, developed trade linkages and geographic proximity.

Extracting and retaining maximum value for that production, along with maintaining and developing competitive advantages, would be key to ongoing growth in exports, Rabobank senior analyst Hayley Moynihan said.

But New Zealand was not the only country ''eyeing the opportunities'' presented by the increasing food demand from a rising Asian middle class and maintaining competitiveness was vital.

Food safety was also an important factor identified. Plagued by local food safety issues, many trading partners were seeking the assurance of high quality imported food and agricultural products, Ms Moynihan said.

New Zealand's strength in international trade links with key importing markets was expected to be a distinct competitive advantage for the country's agricultural exporters.

A key focus was the ongoing negotiations with Russia, Belarus and Kazakhstan to form a Free Trade Agreement.

Last week, The New Zealand Herald reported China's Yashili had entered into a conditional agreement to buy industrial land for a proposed infant milk formula plant at Pokeno, 50km south of Auckland.

Yashili New Zealand Dairy was awaiting Overseas Investment Office approval to proceed with the $210 million project. Annual production was planned to be 52,000 tonnes of finished and semi-finished milk product annually.

If construction was approved, the plant's demand for milk would ''certainly present a challenge'' to current manufacturers, Prof William Bailey, from the department of agriculture at Western Illinois University said, in the latest ASB Commodities Weekly.