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Wednesday, 30 June 2021 06:55

Outlook good despite Covid

Written by  Peter Burke
MPI director general Ray Smith MPI director general Ray Smith

Despite the disruption of the Covid-19 pandemic, revenue from New Zealand's primary exports in the past season only dropped by 1% and is predicted to quickly pick up and reach a record high of $49.6 billion in the next 12 months.

The latest MPI Situation and Outlook Report for Primary Industries report says this figure is likely to increase further and to reach $53.1 billion by 2025.

The traditional big ticket earners of export dollars - dairy and meat - are down on the previous year, with only horticulture and forestry making any appreciable gains. The report says consumer demand for wine and fruit is strong and demand by China for logs the same.

MPI director general Ray Smith described the result as remarkable and says it's great to see the signs that dairy and meat products will bounce back from this glitch.

"We hvave got really good economic performance out of our primary sector last year and credit to every farmer and producer in the country," he told Dairy News. "Demand for dairy products is huge so dairy prices are good and we expect them to hold up throughout the years to come."

Smith says, overall, there is huge demand internationally for our products and if you look at horticulture its growth doesn't stop.

"The reason for the demand worldwide is the fact that is we have been very well regarded all the way through Covid for producing quality products that are safe to eat and consume, from a country that is Covid free. I think these things have stood us in good stead," he says.

The 2020/21 season was the first full season to be hit by the pandemic and it's not surprising that revenue from dairy took a bit of a tumble on the previous season. It was down by 5.4% to $19 billion in the year ending June 2021. It was a hard season with disruptions to supply chains ancd considerable global commodity price volatility. However, there are good trends emerging with dairy commodity prices lifting in recent months.

On the home front, favourable weather in most dairy regions saw good pasture growth and overall milksolids production in NZ for the 20/21 season is expected increase by 1.9% on the previous year to a record high of 1,933 million kg/MS.

The report describes these results as outstanding given that cow numbers continued to decline (now 4.83 million) and MPI believes there will be a small ongoing decrease in the amount of land used for dairy farming. It says there have been almost no dairy conversions in the past two years and some dairy land is going in to horticulture, especially avocados and kiwifruit.

Meat and wool revenue for the 20/21 season fell by 2.8% to $10.4 billion. But this is expected to recover and reach an estimated $11.2 billion by 2025. The virtual closure of the food service industry, freight issues and the stronger NZ dollar all played a part in last season's drop in export revenue. According to the report, prices for all meat categories are expected to fall in the coming year with venison taking a significant 23.5% drop.

Back on the farm there is a prediction that livestock numbers will continue to fall - attributed to the suite of environmental reforms, greenhouse gas requirements, coupled with a trend to convert some sheep and beef country to forestry. The average farm profit before tax on all classes of farms is forecast to be $124,200 - a drop of 20.4% on the previous year.

Horticulture once again bucks the downward trend of the livestock sector, with revenue up slightly in the 20/21 season and set to race away from $6.5 billion to over $8 billion by 2025. Kiwifruit is the major contributor to these gains.

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