Bright outlook for primary industry

International dairy prices are forecast to sit at relatively high levels due to growing demand for dairy exports in emerging markets. Photo by Stephen Jaquiery.
International dairy prices are forecast to sit at relatively high levels due to growing demand for dairy exports in emerging markets. Photo by Stephen Jaquiery.

Agriculture, forestry and fishing exports are forecast to increase to $36.4 billion for the year to June, driven by rapidly growing demand in emerging markets and supply constraints among major competitors.

The Ministry for Primary Industries has updated the Situation and Outlook for Primary Industries forecast for January, revealing that those exports were forecast to lift by a further $4.9 billion.

In releasing the figures, Primary Industries Minister Nathan Guy said it showed how the primary industries continued to underpin New Zealand's economy.

It was very pleasing to see dairy sector returns forecast to rise by $2.7 billion in 2013-14, and meat exports to increase by $1.2 billion over the same time.

The two key drivers of the forecast increases were the rapidly growing demand in emerging markets - predominantly China - and supply constraints among major export competitors, largely due to diminished US and EU dairy and beef production.

The total dairy forecast for 2013-14 was now $16.69 billion. International dairy prices would continue to sit at relatively high levels due to growing demand for dairy exports in emerging markets.

That ongoing growth in demand would offset the price impact of increasing supply from the US and EU, the report said.

Export revenue from meat, pelt and wool products was forecast to reach $6.64 billion for 2013-14, a 22.1% increase over the forecast provided in last year's Situation and Outlook.

That was primarily due to increasing international prices and volumes, particularly to China.

China would continue to be a big market for beef and lamb, although exporters might try to manage exposure in that market due to ongoing trade challenges, the report said.

Continued shortfall in beef production would keep prices up and the increases in Indonesian quota volumes would contribute to a good performance for the sector for 2014.

Recovery in traditional markets was set to continue, with increasing demand in the UK for chilled lamb before the northern hemisphere spring season.

Log prices increased by 30% in the second half of 2013 and forestry firms were expected to take advantage of higher international prices by increasing harvest volumes, leading to additional growth in returns of $0.8 billion in 2013-14.

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