Agricultural exports boom despite war, pandemic, inflation and all the rest
The primary sector is expected to contribute a record $52.2 billion in food and fiber export earnings for the year to June 30, despite a highly volatile set of pressures, according to the Ministry of Primary Industries (MPI ).
In its latest report on the state and outlook for primary industries, the ministry outlines these pressures, such as fertilizer prices at a 15-year high, energy prices rising at a pace last seen in 2008 , supply chain and logistics choke points, China Covid disruption, shutdowns, soaring inflation, labor shortages and global uncertainty centered on war in Europe.
The primary sector has also had some elements in its favour, such as rising commodity prices, the depreciation of the New Zealand dollar which makes our exports more affordable, high world prices for dairy and meat products and a historical free trade with Great Britain.
Its strong performance is expected to fade over the next two years, with industry profits expected to hold steady at around $52 billion through 2024, before climbing to over $56 billion in 2026.
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According to the outlook, gross revenue from the agricultural sector has increased by 45% to $30 billion since 2016.
The record $52.2 billion in exports expected for the current year represented a 9% increase from last year, and was the first time the sector’s profits exceeded $50 billion. dollars.
The sector accounted for 81.8% of New Zealand’s merchandise exports in the year to 31 March 2022. This ratio had increased over the past decade, with growth in primary industry exports outpacing that of primary industries. non-primary industries in nine of the past 10 years, the outlook says.
Growth was fueled primarily by the dairy and meat and wool sectors.
Dairy export earnings are expected to rise 13% to $21.6 billion in the year ending June 30, despite an estimated milk production decline of 4%. The increase was driven by key competitors exporting less and “firm” demand, according to the outlook.
Record farm gate milk prices were expected. The farm gate milk price forecast by Fonterra is currently between $8.25 and $9.75 per kg of milk solids. If the midpoint of that range is reached, the payout would be the highest in the co-op’s history, contributing about $14 billion to the economy.
Meat and wool export earnings are expected to rise 18% to $12.2 billion in the year to June 30. Meat and wool export prices have soared, also due to tight global supply, the reopening of food services around the world and rebounding demand, according to the MPI report.
Global meat supplies were tight due to a reduction in the global cattle herd, a series of export restrictions in major exporting countries and African swine fever limiting pork production in some countries.
The Meat Industry Association recently said that New Zealand’s red meat exports topped $3 billion in the first quarter of 2022, despite declining volumes due to continued global supply chain and trade. challenges of the pandemic.
Horticulture export earnings are expected to rise 2% to $6.7 billion, thanks to two consecutive seasons of large kiwifruit harvests and higher wine export prices.
Wine exports were on track to generate $1.9 billion in revenue, with longer-term forecasts pushing wine revenue to over $2 billion in 2024, cementing the industry firmly in second place. after the kiwi in terms of income from horticulture. Apples and pears were expected to fetch $900 billion.
The horticulture industry was under particular labor pressure, with Zespri recently saying next season’s kiwifruit harvest would be lower as growers faced continued labor shortages.
A smaller but notable contributor to the bumper year was cherry exports, which rose 40.5% to $77.8 million for the 2021/22 season, with both volumes and prices higher. Some 3,223 tonnes of cherries were exported, up 26.8% from the previous year, at an average price of $24 per kilogram, up 10.8% from the previous season. This is the second best export performance ever, after 2017/18.
Not all sectors have prospered. Forestry exports fell 4% to $6.2 billion, although this partly reflects a record harvest last year.
Arable land exports also fell 2% to $255 million.