Milk Powder Prices Prop Up Farmgate Milk Price
Milk powder prices are keeping farmgate prices up, helping processors offset the dip in milk fat prices.
In its latest Situation and Outlook for Primary Industries (SOPI), MPI predicts export revenue into the primary sector will rise from its estimated low for 2015 of $35.2 billion to $41.3b by 2019.
The report says the current dairy market volatility will continue in the short term and predicts export earnings from dairy to remain much the same for this and next season, before lifting by 2017, with this trend continuing over the following two years.
Earnings for meat and wool are estimated to be $8.7b this year and to move only marginally upwards by 2019. Earnings from horticultural exports are expected to rise due mainly to growth in exports of kiwifruit and wine.
Forestry exports will lift from their present $4.6b to $5.3b by 2019.
The report acknowledges the challenge to the sector with dairy exports dropping 22% and forestry 10%. But it points out while overall export earnings for 2015 will be down by 8% to $35.2b, the situation is less dire because of growth in meat and seafood exports.
Of MPI’s priorities, biosecurity and food safety are predictably at the top of the list.
The report notes that MPI has increased its staff in China to five to enhance market access and that it has established new positions in Indonesia and Dubai. Two more staff are learning Mandarin in preparation for working in China.
The SOPI report covers all the industry sectors in some depth and gives a good insight into MPI’s view of their future.
In the meat and wool section, MPI predicts an ongoing decline in sheep numbers from the present 28.9m to 28.7m by 2019. Over the same period, lamb exports are forecast to increase slightly to $2.2b while beef will drop slightly to $2.7b. Wool exports are expected to increase from $7.81m to $8.53m by 2019.
MPI says sheepmeat prices have been suppressed by softer international prices and the drought in New Zealand, while beef prices, which peaked this year, will soften in response to growth in world supply.
Dairy now earns 40% of NZ’s primary export revenue and the report notes the well-documented reasons for the price drop last season and predictions of the same again this season. It also notes how much NZ now depends on China, which now takes 21% of our dairy products – way ahead of our number-two importer the USA, which takes just 8%.
MPI believes the present problems will persist in the short term, but this will change in the long term. It points to the relaxation of the one child policy in China and says the consumption of dairy products there and elsewhere Asia remains well below global averages.
MPI says while local dairy production in China is expected to increase to 48m tonnes by 2024, consumption will be 63m tonnes a year.
The rapid rise in the export of gold kiwifruit is boosting the sector’s export earnings. In 2014, kiwi gold earned $198m, but by 2019 this will have at least trebled to $682m.
Conversely, green kiwifruit exports, which earned $612m in 2014, are expected to increase to only $643m by 2019. However, while total exports of gold kiwifruit will be up, MPI predicts the price per tray will fall to $13.80 from the high of $17.20 last season.
