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Demand for New Zealand logs and timber is expected to remain strong with Chinese growth continuing and the need for reconstruction following earthquakes in New Zealand and Japan and floods in Australia.
The growing importance of log exports, largely driven by Chinese demand, has been a major feature of the past 18 months, according to the Ministry of Agriculture and Forestry's annual report on the state of New Zealand's primary sectors released yesterday.
Strong demand has seen New Zealand's exotic forest harvest reach a record 24.8 million cu m in the year ending December 31, 2010, up 19% on the previous year.
That demand from the export log sector was expected to continue through 2011 and 2012. That, coupled with a relatively strong demand for sawn timber, limited growth in the New Zealand harvest, and supply restrictions from competitors such as Russia, meant log and timber export prices were likely to rise.
Total export earnings for the year to June 30 this year, were projected at $4.3 billion and earnings for the June 2012 year were forecast to rise to $4.7 billion.
Log export volumes were 10.9 million cu m in the year ended December 31, 2010, more than half that volume destined for China.
Continued demand from China was expected as 2011 progressed, owing mainly to strong economic growth, continued urbanisation and the effect of the Russian log export tax.
Indian and Japanese markets had the potential to grow because of strong economic growth in India and earthquake rebuilding in Japan.
The outlook for timber was improving, with both domestic and export demand rising under conditions of tight log supply.
Beyond 2012, demand was expected to increase as a result of strong demand from China, the recovery in Australia and the United States, and increased demand from Japan.
New Zealand exporters were receiving high prices for logs, wool, lamb, timber, beef and dairy products as the rebounding global economy drives demand for commodities.
Beyond 2012, steady production growth in dairy, forestry, wine and kiwifruit, together with an assumed depreciation in the New Zealand dollar, led to strong forecast growth in export revenues, the report said.
The economic outlook for New Zealand agriculture and forestry's trading partners, while still uneven, was significantly better than 12 months ago. Many of the financial risks had faded as private sector balance sheets have been repaired.
Gross agricultural revenue was estimated to have increased by 10% in the year to March 31, 2011, driven by significant increases in dairy, cattle and wool revenue.