Friday, 29 January 2021 07:25

Outlook for 2021 'bristling with risk'

Written by  Staff Reporters
Rabobank senior dairy analyst Emma Higgins. Rabobank senior dairy analyst Emma Higgins.

Amid significant global turbulence, New Zealand agricultural producers are poised to enjoy a fifth consecutive year of general profitability in 2021, according to a new report by Rabobank.

In the bank’s Agribusiness Outlook 2021 report, Rabobank says while the outlook for the year is “bristling with risk”, and bumps are anticipated throughout the coming months, most agricultural sectors can expect to see average to above-average pricing, manageable cost inflation and production holding up well.

Report co-author, Rabobank senior dairy analyst Emma Higgins says that as 2021 gets underway, the world is still turbulent for New Zealand’s agricultural sector.

“The Covid-19 pandemic continues to rage in many regions around the globe, the finer points of the messy Britain and the EU divorce are now in full swing, and tensions in the US remain high following an acrimonious transfer of power to the new Biden administration,” she says.

“More frequent use of market intervention is a further factor creating global instability as are ongoing trade wars which have distorted the direction and price of traded goods.”

Higgins says that while New Zealand agriculture has been unable to completely avoid the discomfort caused by this turbulence, the sector has done the right things to keep itself on a strong path.

“New Zealand’s authorities and citizens have managed to control domestic spread of Covid-19 better than almost any other country in the world, while we also saw domestic agricultural supply chains pivot during the peak of infections last year, allowing these to stay open and continue to function at close to full capacity. In addition, we’ve seen diplomatic relations with key trading partners remain stable, keeping vital markets open,” she says.

“This may sound simple, however, it’s a list of achievements that has eluded most countries and their ag industries in 2020 and early 2021. And given the extent of the turbulence, and compared to most other peers, New Zealand agriculture is travelling astoundingly well.”

While New Zealand agriculture is well placed, the report claims 2021 brings more uncertainty than most years and there are a number of potential bumps which may need to be navigated in the year ahead.

Higgins says it’s unlikely there will be a marked difference in pandemic recovery in the US and the EU until quarter two as winter passes and the vaccine rollout.

“Commodity-specific risks will also need to be tackled – such as the threat of Chinese destocking, labour shortages in the horticulture sector and the impacts on the animal protein sector of China’s pig herd recovery – and we also expect to see New Zealand exporters facing a much stronger New Zealand dollar in 2021.”

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