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14 Feb 2017

New Zealand Agriculture Adjusts

Considerable changes will impact New Zealand agriculture in 2017, with a number of key developments likely to bring uncertainty and opportunity in equal measure. According to the recently-released New Zealand Agricultural Outlook 2017 report by banking specialist Rabobank, Kiwi agriculture faces a "moment of truth" due to heightened regulations domestically and changes to free international trade. While most producers can expect a challenging year ahead, market fundamentals support further recovery in the dairy and horticulture sectors.  

According to the report, the dairy sector can expect further recovery in 2017, with market fundamentals likely to support milk prices in 2017 and restore healthy profit margins to dairy farmers who have been through two difficult seasons. The beef sector will struggle in 2017 as record beef production translates into weaker export prices. According to Rabobank Country Banking general manager Hayley Moynihan, “Record global beef production will see downward pressure on New Zealand cattle prices while the strong New Zealand dollar is the major headwind for greater sheep meat returns during 2017."

While demand will remain strong for sheep meat throughout the year, Chinese buyers are likely to remain quiet when it comes to wool. The horticulture sector can expect a bumper year according to the report, with good crops expected for avocados, apples and kiwifruit and demand from Asian markets likely to remain healthy. Prospects for the wine sector are also strong, with good grape prices in 2016 likely to continue for much of the year. Rabobank have also forecast rising fertiliser prices this year, with the New Zealand dollar expected to fall as fiscal stimulus measures in the US are put into place.

According to Hayley Moynihan, international trade is the big issue of 2017: “The industry will be keeping a close watch on global trade developments in 2017 following Donald Trump’s election in the US and the resulting breakdown of the Trans Pacific Partnership (TPP) agreement ... The breakdown of this agreement brings with it increased risk of an escalation to rising protectionism already evident through the last few years in many parts of the world, as well as increasing the importance of this year’s trade negotiations with China – on an improved Free Trade Agreement (FTA) – and with the United Kingdom and the European Union on FTAs."

International trade is not the only concern for Kiwi producers, however, with environmental regulations also causing problems on the ground. “Tightening environmental regulations, particularly in the Waikato and in Southland where significant plan changes are taking place, have the potential to increase costs and restrict intensification or change land use in 2017 and beyond,” said Moynihan, adding “Environmental regulation could also become an election issue, as could other topics relevant to the sector such as greenhouse gas liabilities and rules around foreign investment. Policy relating to these areas may be subject to change, especially if a coalition government including Labour, NZ First and the Green party were to be voted in.”

Image Source: ChameleonsEye /