MAF sees agriculture weathering economic slump

Wednesday 29th July 2009

New Zealand’s primary sector will be able to weather the economic slump, with worldwide demand for food products expected to hold in the coming years, says the Ministry of Agriculture and Forestry.

Still, lobby group Federated Farmers isn’t convinced after it found its members to be “deeply pessimistic” about the state of the domestic economy.

Primary sector industries including meat and forestry will see steady increases in returns over the next four years according to MAF’s Situation and Outlook for New Zealand Agriculture and Forestry, with a sharp devaluation in the currency over the past 12 months “insulating New Zealand from some of the effects of the global recession.”

The kiwi has slid 7.7% to 61.28 on the trade-weighted index, or TWI, a measure of the currency versus a basket of five trading partners. A resurgent currency in the past three months caused Reserve Bank Governor Alan Bollard to issue several warnings about the danger of a strong New Zealand dollar to an export-led recovery, and Federated Farmers President Don Nicholson said this could erode export prospects for dairy, meat and fibre farmers.

Exports for the month of June fell 11% to $3.2 billion from the same month a year earlier.

“A persistently high kiwi dollar may further erode the forecast payout for Fonterra suppliers as well as what meat and fibre farmers will earn,” Nicholson said in a statement. “Farmers remain deeply pessimistic about the state of the general economy and their own prospects for the next 12 months.”

A survey of Federated Farmers members found a net 45% of respondents expect general economic conditions to decline in the next 12 months, with dairy farmers making up the largest proportion of pessimists at a net 53%.

A net 72% of dairy farmers expect profits to decline this year, after Fonterra Cooperative Group slashed its opening forecast payout 13% to $4.55 per kilogram of milk solids.

MAF’s assessment of the dairy sector was less gloomy, saying “demand for dairy products is expected to resume a steady rate of expansion, supporting higher prices” once the recession’s over.

While MAF’s report accepted international dairy prices had fallen “dramatically” over the past year, it considered the current levels to be “normal” before the price hikes of the past two years.

MAF director-general Murray Sherwin said although the current outlook was a downgrade, it was “by no means doom and gloom.”

“People will always need feeding, so with the global population continuing to grow, demand for food products will also increase,” he said.

Businesswire.co.nz

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