Growth mindset for rural sector

1 Apr 2019

Dairy prices remain strong
Optimism creeping back into beef and sheep markets
Record harvest for apples and kiwifruit expected
Demand from key export partner China robust despite economic headwinds

New Zealand dairy prices continue to strengthen due to a reduced global milk supply according to the latest ANZ Agri Focus report.

The reduced supply has supported a lift in ANZ’s milk price forecast for 2018/2019 and into the following season says ANZ Agri Economist Susan Kilsby.

“We’re now forecasting a milk price of $6.40/kg for the current season and see that lifting to $7.30/kg for the 2019/2020 season,” Ms Kilsby says.

Despite higher returns dairy farmers remain cautious and are focused on ensuring their operations meet regulatory and consumer expectations.

Paying down debt is also a high priority for farmers.

Sheep and beef sector: optimistic

“Optimism is creeping back into the sheep sector, with lamb and mutton farmgate returns remaining exceptionally high by historical standards,” Ms Kilsby says.

Meanwhile, farmgate returns for beef cattle have eased as processing output has lifted on the back of a reduction in pasture production.

“Beef returns have benefited from the emergence of China as a solid alternative market, reducing the industry’s reliance on the United States.”

Apples and kiwifruit turn gold

New Zealand’s horticultural markets continue to provide solid returns for orchardists and another record harvest for both apples and kiwifruit are expected this season.

However, yields aren’t quite so rosy for many of New Zealand’s wine growers.

“Wine growers will likely see yields fall below expectations for the coming season.”

China remains a strong export market

Commodity returns, while remaining generally strong, are pushing against a backdrop of slowing global economic activity, Ms Kilsby says.

“This poses a key risk for our agriculture and horticulture sectors due to New Zealand’s high exposure to export markets, and China, in particular, which directly accounts for 24 per cent of the country’s exports.

“We have further exposure to China as many of our trading partners, including Australia, are also highly exposed to the Chinese market.”

But, for now, demand from China is showing no signs of letting up.

About ANZ Agri Focus

ANZ Agri Focus is a bi-monthly overview of developments in New Zealand’s rural sector, combined with research on topical issues. The report typically includes feature articles on current topics, a review of the past month, the rural property market and information on key commodities.

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