Rosy outlook for ag sector
Farmers are in for a second consecutive year of profitability but the sector has been thrown some curve balls, a newly-released report says.
In its annual Agribusiness Outlook, Rabobank says 2018 should be profitable for most New Zealand producers.
Rabobank New Zealand Country Banking general manager Hayley Gourley said global market conditions were firmly in the favour of Kiwi farmers.
‘‘The world economy is enjoying a broad-based recovery and the prices of the key commodities produced in New Zealand are generally high, while prices for key farm inputs, especially fertiliser, are generally low,’’ she said.
‘‘The bank retains a bearish outlook for the NZ dollar over the next 12 months, which further plays into the hands of the country’s export-focused agricultural producers.’’
Gourley said an additional positive for the sector was the settled nature of agriculture’s downstream processing and marketing industry.
‘‘Fonterra is making money in its offshore businesses and has cleared overhanging litigation, while other dairy processors are performing well. In the meat sector, recent ownership changes have now been bedded down which have contributed towards increased profitability and reduced debt levels and there now appears to be far greater surety of industry structure and strategy than evident in recent years,’’ she said.
A record $823 million of lamb and mutton headed to markets offshore in the three months to December as farmers reacted to high prices and made cuts to their sheep flock to conserve drying paddocks.
Beef returns were also at their second highest level in the quarter year to December, says Beef + Lamb New Zealand’s (B+LNZ) Economic Service.
Export volumes of lamb and mutton were up at record values and near record values for beef.
‘‘The average value per tonne for exports started at a high level after strong growth during the 2016-17 season and have remained strong despite higher processing volumes so far in 2017-18, ‘‘ said B + LNZ chief economist Andrew Burtt.
He said farm-gate prices for lamb were up 30 per cent and mutton 59 per cent for the first quarter compared with the same period the previous season. In comparison, cattle prices were relatively steady at up 5 per cent.
The horticulture industry had also made great strides in its processing capability and recent investment in processing, storage and infrastructure was likely to continue this year, Gourley said.