The Covid-19 pandemic has put enormous pressure on the country’s primary sector, yet it has managed to expand export receipts by $1.7bn over the previous year.
The government, or at least several ministers in it, are celebrating the effort of the primary sector in doing so, and recognise the sector is a key driver in rebooting the economy.
Yet the government, with its climate change measures hitting agriculture’s methane emissions and its freshwater reforms, has done little to encourage farmers to expand production.
When Agriculture Minister Damien O’Connor says the government is focused on creating more demand, pursuing greater market opportunities to generate higher export returns and growing rural communities with new jobs, the response down on the farm may be no more than a one-handed clap.
Farmers are more likely to be grumbling over the government’s failure to drive down the exchange rate. Or to do more to build irrigation schemes.
But at least O’Connor accepts that the strength of the primary sector, coupled with the success of the health response to Covid-19, gives NZ a head-start on the world as the economy gets moving again.
In place of the June 2020 edition of the Situation and Outlook for Primary Industries (SOPI), the Ministry for Primary Industries has released an Economic Update for the Primary Industries. For the year-to-date it shows primary industries export revenue is tracking 4.5% ahead of the previous year.
* Dairy exports were particularly strong since the start of March, up $512m (12%) compared with the same time last year.
* Chinese meat imports surged in the second half of 2019. The animal protein shortage, due to the African swine fever outbreak in China, should help support prices and demand over the next year.
* There was a strong start to the season for apple and kiwifruit exporters with revenue up $274 million (18%) on last year since the start of March.
O’Connor says overseas consumers are now more than ever looking for healthy, NZ-made food.
“We’ve seen that with the sustained demand for fresh fruit, particularly in Europe and North America and the strong demand for red meat in China,”.
He notes the economic update provides a snapshot of how Covid-19 disrupted NZ’s primary industry exports – including logistics issues and more limited air freight options— and demonstrates how the sector and MPI worked together to find ways to operate safely under Covid-19 restrictions.
“We are by no means out of the woods and the next few years are going to be tough on some sectors as importers and consumers re-evaluate their priorities in the wake of COVID-19”.
Fisheries Minister Stuart Nash reports the Chinese market for rock lobster, which was significantly affected by COVID-19, is now showing signs of recovery as seafood markets begin to reopen.
He says NZ kaimoana enjoys an excellent reputation around the world, built on the hard work of generations of fishing operators.
The almost $2bn in export revenue it brings into the country will be particularly important in the recovery from the effects of Covid-19.
In his primary sector area, Forestry Minister Shane Jones said there is still considerable volatility in the log export sector, which the government is closely monitoring.
“However, I am confident forestry and wood processing figures will improve over the coming months and that this multi-billion-dollar sector will play a significant role in the economic recovery“.
During the level 4 Covid-19 restrictions, forestry and wood processing was not considered an essential service, so the decrease in outputs was in line with what was expected.
The MPI economic update lists these points:
* Fresh fruit exports, including apples, kiwifruit, and avocados, are expected to fare better relative to other sectors thanks to strong global demand.
* Dairy companies had contracted a high percentage of the 2019/20 season’s milk supply and will be able to maintain current season milk prices at high levels, which will support on-farm profitability in the short term. Looking ahead to 2020/21, the impact of declining dairy export commodity prices and weakness in dairy food service and consumer markets globally, will weaken processor profitability and flow on to farm gate returns.
* Meat exports to China were reduced due to Covid-19 but were largely offset by exports to other countries such as the USA. Since the start of lockdown the Chinese market has recovered and overall meat exports are tracking at similar levels to last year.
* Seafood was affected by Covid-19 earlier than other industries, culminating in 68% lower export revenue to China in February, driven mostly by declines in airfreighted rock lobster. The Chinese market is slowly recovering and seafood markets are beginning to re-open, which should alleviate export constraints at least for live rock lobster.
* Wool prices are likely to remain subdued for at least the next year due to lower demand for wool in China – a flow-on effect of a global recession.
* Forestry has been able to ramp up since NZ moved to Alert Level 3 in late April, following a total harvest volume in April of just 377,000 cubic metres, 87% down from the corresponding period in 2019. Latest market reports show higher log prices in China and lower inventories at Chinese ports.
O’Connor says the Labour coalition government is committed to supporting the “vital” primary sector particularly in continuing to fetch value and create jobs – including $19.3m to place 10,000 people into primary sector jobs, $127m for jobs to help control wilding pines and get populations of wallabies under control and the government’s $110m worker redeployment package, to create employment for people who have lost their jobs.
While farmers may be pleased with both the MPI economic update and the ministerial huzzas, they may be absorbing more finely tuned advice on their own individual businesses, seeking in particular financial resilience for the challenges ahead. They know the Covid-19 crisis poses a risk on top of others including climate, environmental regulations and compliance costs.
As Point of Order sees it, there is now broad acceptance that farming for capital gain is off the table for the foreseeable future, and the focus has been on reducing debt. The dairy sector in particular has seen a significant reduction in debt over the past 12 months.
Point of Order 