Path to recovery outlined | Rotorua News | Local News in Rotorua

Dairy products and logs are expected to lead the export recovery in the primary sector.

Ministry of Agriculture and Forestry director general Murray Sherwin visited Rotorua's Waiariki Institute of Technology yesterday as part of the ministry's annual road show to present its sector report.

The Situation and Outlook for New Zealand Agriculture and Forestry document was prepared before the 2010 Budget and Sherwin said it was already a little dated in places, but gave some indication of the trends and issues expected to affect the industry in the next five years.

"When we made these projections a year ago, we were struggling through the collapse of the global economy - and we are still dealing with that."

He said New Zealand's exports had suffered as markets such as the United States stopped buying and started using up stocks instead, but there was a "generalised sense of impending recovery".

"I do not think we have heard the end of [the recession] yet, but 2010 is now expected to show growth of four per cent globally - up from expectations of less than two per cent in late 2009."

Sherwin pointed to two main themes in the years ahead: a huge surge towards China and volatility in prices.

Trends highlighted in the report include a lift in prices for New Zealand diary products and in demand for forestry products - particularly from China.

Dairy

Dairy is forecast to grow strongly as the industry recovers from droughts in 2008 and 2010. The outlook has improved steadily since September 2009 and inventory rebuilding and strong demand in emerging markets have been important sources of demand.

Projected milk prices are described as favourable, assuming an eventual depreciation in the New Zealand dollar. Production is expected to expand by 14 per cent in the year to May 31, if climatic conditions allow.

Meat and Wool

Lamb production dropped this year due to de-stocking in the 2008 drought and low profitability. Sheep numbers are at their lowest level since 1946, but lamb prices in New Zealand's key export markets are strong due to supply shortages from Europe, Australia and New Zealand.

Beef prices have come under pressure through increased competition in several markets and drought de-stocking has led to a decrease in export volumes.

Forestry

Prices for New Zealand forestry products are expected to increase through strong demand. Log exports have been described as "booming" in 2009 and 2010 - largely due to demand from China, but domestic and other international demand for sawn timber is picking up.

Harvest volumes are expected to be limited in the short term by available mature wood and harvesting and transport capacities.

Horticulture

Kiwifruit and wine export values both passed the $1 billion milestone during 2009.

Overall kiwifruit export prices rose by 11 per cent to more than $10 a tray, driven by strong demand for the gold fruit. These prices are expected to be more buoyant than usual at the start of the southern hemisphere selling season.