New Zealand Primary Export Revenue Set To Fall
13 June 2012 20:00 - Florence Fullalove

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New Zealand Primary Export Revenue Set To Fall

In its annual overview and forecasts the Ministry for Primary Industries has said that export revenues from the primary sector are forecasted to decline during this year because of falling prices. According to the report the impact of a high New Zealand dollar has been mitigated by strong product prices from most primary industries with horticulture and wood processing being the main exceptions. World prices for dairy products, meat and forest products have been falling for a year now and the exchange rate has provided only a limited offset. Primary industries have been one of the brighter areas in the New Zealand economy but prices are now falling. The report says that strong revenues over the past year have been driven by historically high prices, good production in agriculture, record harvest from New Zealand forests and further expansion of aquaculture production.

The ministry’s predictions rely on the Treasury’s assumptions for the exchange rate, which are that it will remain about where it is on for the coming year then deprecate by about 12.5% by 2016. If it does not and stays high, the ministry predicts that dairy export revenue will be 21% lower than its baseline forecasts by 2012, meat and wool revenues 22% lower and forestry exports 21% lower. MPI deputy director-general Paul Stocks says prices remain reasonably favourable despite the predicted fall, “Production this past season has generally been good, even great for some, due to favourable climactic conditions.” He added, “Primary industries are continuing to sell more into Asia. With recessionary pressure in Europe, the trend towards Asia has turned into a stampede. We’ve based our forecasts on an expectation that it will continue to hold up for some time, but ultimately depreciate due to New Zealand’s high level of overseas debt.”