Ray Smith: Dairy still has growth potential despite flat export outlook
Ministry for Primary Industries (MPI) Director General Ray Smith believes there is potential for an increase in dairy farming in New Zealand.
MPI has revised downwards its earlier forecasts for primary exports, to $27.5 billion – 5% less than a year ago.
The biggest hit, not unexpectedly, is on lamb exports, predicted to earn $1.91 billion, a drop of 17% on the previous year.
MPI is forecasting that lamb prices for season will be about $4.88/kg, with an 18kg lamb this season fetching about $88 – $113 last season. This is due mainly to weaker consumer demand for lamb especially in the European Union.
The value of beef exports will remain about the same as last year, aided mainly by the drought in the US. Dairy prices will be down by 8.1% to $12.6 billion, this figure only marginally below what MPI was forecasting in June.
While kiwifruit prices will hold up this season, the outlook for next season is bleak as the impacts of Psa are felt. Other horticultural exports are expected to do well this season. MPI also predicts forestry will continue to be squeezed in the coming years.
What's not new is that everyone was predicting 2013 to be a tough season, especially given that it was exceptionally good climatically and the markets were receptive to our products at good prices. What is new is that MPI has revised downwards its June predictions by 3% in just six months, something it says creates some 'short term challenges' for the primary sector.
Chris Jones, MPI's manager of economic information and analysis, says the main factors are the global economic situation, a New Zealand dollar expected to remain strong for the next two years and the spread of Psa.
On the plus side, Jones says the drought in the US offers opportunities for beef and the growth in developing markets in Asia looks good in the medium-to-long term.
"While the IMF has downgraded Chinese growth, it's still forecasting growth in that country of 7-8%, admirable growth by anyone's estimation.
"While many commodity prices have taken a hit since we did our forecast in June, dairy prices have risen strongly, horticulture has held up well and meat and dairy volumes have been high," he says.
A major problem on the horizon is the impact of Psa on kiwifruit exports. Jones says exports of gold kiwifruit may halve in 2013/14. There could be as few as ten million trays exported in those years compared with the 24 million trays exported in 2012/13.
