15 Dec 2011

MAF primary sector forecast lowered

6:32 am on 15 December 2011

The Ministry of Agriculture & Forestry says the primary sector is still on track for a record export earnings year.

But international economic uncertainty has caused it to scale down earlier predictions in its annual situation and outlook report, released in June.

In its half year update, MAF has lowered its export revenue forecast for dairy, forestry, meat and wool by 3.5%, or $930 million for the year to June.

Sector policy director Iain Cossar says the key factors are the pressure on European Union economies and slowing demand in China, but he says the pastoral sector is still having a very good year.

He says the meat sector is very positive with lamb prices the highest in real terms since 1977 and the lamb crop is up about 7% on last year.

Mr Cossar says in dairy there's been a phenomenal spring with an increase in the volume of milk solids.

But dairy prices have weakened, driven by increasing supply from competitor nations and some easing in demand and prices out of China for milk products.

He says there's also some weakening in demand for logs out of China.

Mr Cossar says MAF is also expecting wool prices to fall after their rapid rise in the past year.

But its most negative outlook is for the kiwifruit industry, where it says the loss of vines from the PSA disease could halve gold kiwifruit production from 30 million trays this year to about 16 million trays in the coming season.