Bayleys news & articles

Sunny side up for rural sector’s real value.

Tags: Rural Rural Insight

The primary sector’s contribution to New Zealand’s wealth creation has continued to remain strong as global demand for quality, high end food products keeps growing.

Whether it is lamb loins for China, Manuka honey for the United Kingdom or chilled grass-fed Wagyu to California, New Zealand producers continue to punch above their weight on the world stage as another farming season approaches its close.

Running an eye over MPI’s definitive Situation and Outlook for Primary Industries report for March is a good reminder about how healthy the primary sector actually is.

Expectations are for dairy revenue to lift by 5.5% on last year’s healthy returns, to total a near record $17.7 billion for the year ended June. That has been helped by a sustained period of relatively consistent weather aiding grass growth, and helping keep production levels up. But there has also been a welcome turnaround in key dairy commodity prices at the end of last year.

Similarly meat and wool income is expected to be 6% up on last year, topping $10 billion in export earnings this year, driven largely by the higher prices being paid for sheepmeat.

China in particular is exhibiting an almost insatiable demand for New Zealand lamb and mutton, with prices holding firm even through peak supply periods.

Horticultural revenue also continues to grow, this year up a massive 16% on last year as it pushes over $6 billion in export earnings, with anticipated increases in apple, kiwifruit and wine exports, a result not only of higher prices but also increased plantings in both apples and kiwifruit.

Meantime forestry has become the quiet performer, gaining an additional 7% in earnings this year to head off horticulture with $6.8 billion in earnings.

The innovative, emerging area of other primary sector foods is also starting to be recognised as products like Manuka honey, craft beer, health products and confectionary all contributed to the “other” sector that now totals $2.8 billion, up 3.5% from last year.

Collectively the primary sector is contributing an additional $3 billion to the economy this year, on average up 6% on last year, a figure that only a couple of years ago would have equated to the entire horticultural sector’s exports.

“Collectively the primary sector is contributing an additional $3 billion to the economy this year, on average up 6% on last year. Figures that do much to dispel any uncertainty about New Zealand’s future as a high quality food source.”

A weakening NZ dollar has also helped deliver an added fillip to returns, falling throughout the year, with an average trade weighted index for the June year end forecast to be 2% lower than last year.

The report’s authors also note the primary sector’s performance is even more impressive given the trade tensions swirling around key markets of United States and China.

Bayleys national country manager Duncan Ross says these figures do much to dispel any uncertainty about New Zealand’s future as a high quality food source for the increasingly wealthy, health conscious middle classes emerging through China and Asia in general.

“It seems the greater challenge for the primary sector lies very much here at home. On farms and orchards many in the primary sector may feel somewhat under siege by compliance demands, calls for nutrient reductions, green-house gas issues and the spectre of a capital gains tax hanging over their businesses.”

But when the attention grabbing headlines are pushed aside it is possible to see some highly constructive, progressive work being done to address all these issues, often at a level well beyond any other sector in the economy.

“Green-house gases are a good example. There are 12 demonstration farms running around the country that are all collecting and compiling data to provide farmers with tools to manage emissions – we have already seen one example in Cambridge on Owl Farm at St Peters school where emissions are down 14%, the same amount as the reduction in nitrogen losses, while profit is up 14%.”

The farm has developed a matrix of parameters including nitrogen losses, gas emissions, animal welfare, staff welfare and profitability to monitor its performance, and is starting to meet its goals across all those parameters.

The move to try and better manage green-house gas losses is also being matched by one of the most advanced research programmes in the world, with the Pastoral Greenhouse Gas Research centre working on developing a vaccine or bolus suitable for New Zealand’s pastoral animal system.

Centre head Dr Harry Clark has pointed out that had farming made no progress on gases it would be emitting 30% more per kg of production than it currently is. The sheepmeat sector in particular has made huge strides, producing almost the same amount of red meat from half the number of sheep run 20 years ago.

“The primary sector’s success in addressing issues relating to GHGs and nitrogen losses should be applauded - the sector has made huge strides in addressing them, in very short time.”

“The primary sector’s success in addressing those issues of GHGs and nitrogen losses should be applauded - we are talking issues that have only become really topical in the past 8-10 years, and the sector has made huge strides in addressing them, in very short time. There’s still a way to go, but critics may do well to look harder before throwing rocks at farmers’ efforts,” says Ross.

Download PDF   

Related articles