11 Jun 2012

Primary sector earnings expected to fall

8:48 pm on 11 June 2012

Primary sector export returns are predicted to fall in the 2012/13 year before picking up again beyond that.

The Ministry for Primary Industries on Monday released its annual Situation and Outlook report, which outlines what it expects to see in the farming, horticulture, forestry and seafood industries over the next five years.

The ministry is forecasting a 9% drop in dairy export revenue over the next year, in the wake of a lift of more than 5% in the past year.

A milk price drop is expected in 2012/13 due to weaker international demand and increased production in the European Union and United States.

Ministry deputy director-general Paul Stocks says prices are easing from previously high levels and the medium-term forecast for dairy prices remains strong.

The report says dairy production increased 10% in the year to 31 May.

Lamb prices are falling back faster and further than the normal seasonal decline after reaching a record high of $137 per lamb in November. The report says price-conscious consumers in Europe are shifting to less expensive meats, and it is forecasting further modest price falls.

However, beef demand and schedule prices have held up because of robust demand from Asian markets and falls in US and Australian production.

Horticulture has faced challenging conditions over the past year, due in part to its greater exposure to the European market and the impact of the kiwifruit vine disease PSA.

The 2012 wine vintage is down, and this is expected to provide some lift in prices from the current low levels.

In forestry, record volumes of logs were harvested from commercial forests during 2011/12.

Seafood prices are holding up despite global economic conditions, due to strong demand in China and Australia.