Primary industry revenue to fall in 2017, MPI says

Tuesday 13th December 2016

The Ministry for Primary Industries has warned revenue from the sector is likely to fall by 0.8 percent in 2017 to $36.7 billion, mainly due to a slump in two sectors: meat and wool as well as arable.

In its situation and outlook for primary industries report, the department says it expects meat and wool export revenue to fall 11 percent in 2017 to $8.2 billion due to falling global food prices and declining production. The report notes that "meat and wool exports to China have decreased 14 percent in the year to September 2016, to $1.8 billion, a decline most keenly felt in mutton and wool products."

However, beef exports to China have increased, with rising volumes offsetting slightly lower prices. The document suggests that China could develop into a reliable secondary market for New Zealand's beef exports, after the US.

Dairy export revenue is expected to rise 3 percent in 2017 to $13.69 billion, although this will be offset by a fall in production of 1.7 percent due to a persistently wet spring. Cow numbers are also expected to be down 1.7 percent due to a record cull of cows in the year to June 2016.

Arable export revenue is expected to decline 12 percent to total exports of $180 million, mainly due to a stronger New Zealand dollar and weaker demand for herbage seeds. Demand from the domestic dairy sector is also expected to be subdued as dairy farmers continue to limit costs as they recover from the recent bust in prices.

Honey export volumes have also noticeably decreased, with stocks increasing in New Zealand. Sales to Australia, Hong Kong and China have also slowed noticeably.

The report also notes the strong rise in product being shipped to market by air. Air freight exports have increased three times faster than sea freight since 2011 and now make up 5 percent of total primary industry export revenue. Crayfish is the most valuable product shipped by air freight. It's worth $317 million and attracted prices of more than $100 a kilo in 2016, of which 99 percent goes to China.

BusinessDesk.co.nz

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