After a rough ride since Covid-19 struck, the New Zealand economy is in better shape than might have been predicted at the onset of the pandemic. Yet labour shortages, an energy crisis in Europe and China, and massive inflationary pressures suggest that the passage ahead will be anything but smooth.
With the government abandoning the elimination strategy and moving towards living with endemic Covid, the country is adjusting to the prospect of a new normal. But without any sign of the number of cases of the Delta variant diminishing, restrictions may persist for longer than might have been imagined just weeks ago.
It’s a blow to industries looking to inflows of workers to ease labour shortages, particularly in the rural regions, which last season sustained the economy with the production of commodities that were in relatively tight supply in world markets, fetching excellent returns. Continue reading “Investors see promising signs of recovery in infant formula sales in China”
New Zealand’s Covid-battered economy is once more sustained by its primary industries, as international tourism languishes and earnings from its international education arm are all but invisible.
Despite high charges for shipping, an exchange rate stronger than exporters would like and (some would say) a government which does little to encourage farmers, output from the rural regions is again pumping the lifeblood into an economy which might otherwise be gasping for air.
News from the ANZ this week indicated its World Commodity Price Index lifted 1.5% in September, partially unwinding the previous month’s fall. The lamb sub-index is now at a record level, driven by stronger prices for all cuts.
ANZ Agri Economist Susan Kilsby reported dairy and forestry both regained some ground and aluminium and meat prices were strong. Continue reading “Lift in commodity prices gives boost to the economy – here’s hoping we can keep on shipping our goods to market”
New Zealand’s producers of major exports have been earning the country record returns in foreign markets.
It’s the news which should buoy the whole country after such a tough year.
ANZ’s monthly commodity price index rose 6% in March on February, and is 20% higher than a year ago, to peak at its highest point since it was started in 1986.
Standing out has been the strength of global dairy prices, which gained 12.7% in March, the highest in seven years. Returns for whole milk powder, a key driver for Fonterra’s suppliers, were 43% higher than last year.
ANZ’s agricultural economist Susan Kilsby said:
“Dairy prices are currently being supported by strong global demand, combined with a steady milk supply in the main dairy-exporting nations”.
Meat was close to a one-year high, while logs and aluminium were sitting near two-year highs.
The common feature of the strong prices and demand was China, which was growing more strongly than most economies after the pandemic, Kilsby said. Continue reading “China’s growth is a key factor in lifting returns from NZ’s major exports”
In its Thursday editorial the NZ Herald speaks an important truth: “Investment important to stay on track”. This won’t have startled its more literate readers but in its text it notes the strong result in the latest Global Dairy Trade auction, which prompted Westpac to raise its forecast for dairy giant Fonterra’s payout to its farmers to $7.50kg/MS this season.
“If this turns out to be correct, it will represent the highest payout in seven years for a sector of the economy that is arguably still NZ’s most important, even before international tourism was effectively suspended by Covid-19”.
The Herald editorial goes on to make the case that despite the buoyant mood, the only realistic way for NZ to remain in such solid shape in the post-Covid era is through stronger business investment.
This is the theme which Point of Order set out earlier this week when it contended Fonterra should go hard with this seasons’s payout to encourage investment by its farmer-shareholders in expanding production. Continue reading “Stronger business investment – by farmers, too – is essential for NZ’s post-Covid recovery”
Farmers are back in the frame as the backbone of NZ’s export economy, after the Covid-induced collapse of the foreign exchange earning capacity of the tourist and international education industries. But it is not only the rural industries themselves which are scrutinising bulletins on the prices being earned abroad for commodities. Those data have become a vital item for New Zealanders eager to monitor the recovery of an economy battered by a one-in -100 year event.
This week the ANZ reported its world commodity price index had eased 0.2% in September as lower dairy and meat prices were largely offset by stronger prices for logs and fruit.
In local currency terms the index fell 1.3% as the NZ$ strengthened by 0.6% on a trade weighted index basis during the month.
Hard on the heels of those figures came the results of the latest Fonterra global dairy trade auction where the average price strengthened to $US3143 a tonne and wholemilk powder (which plays a significant role on Fonterra’s payout to suppliers) rose 1.7% to $3041 a tonne.
Volumes sold were about the highest offered in 2020 and the most bidders of the year showed up for the auction. Butter, up 8.4% to $US3561, rebounded from the previous auction. Continue reading “Dairy data should delight Covid recovery monitors while discouraging industry detractors”
Agriculture Minister Damien O’Connor says the primary sector will play a critical role in NZ’s economic recovery once the country emerges from the Covid-19 lockdown.
It is the first time (at least within Point of Order’s close surveillance of the issue) that a coalition minister has acknowledged how the pandemic has shifted the dial inside the economy.
O’Connor says there is no shortage of demand for what NZ produces.
“Our primary sector is part of the solution to global food security concerns in the short-term”.
The government is working alongside the primary sector to help ensure workers get to the places they are needed. Continue reading “O’Connor recognises how pandemic has affected the economy and its primary players”
Farmers are riding a boom with the latest ASB index for primary sector exports surpassing its 2011 level. Lamb prices cracked the $9/kg mark and beef prices are at, or close to, record levels. There is the prospect too that Fonterra’s payout could reach $7.50kg/MS, one of its best ever.
Agriculture Minister Damien O’Connor has not been slow to put his government in line for the credit in reaching these high levels—or to argue a Labour-led government is better for farmers than National.
At least that was the implication in an answer he gave in Parliament last week.
“So farmers and growers are getting better prices for their work under this government than the last National one”.
O’Connor is one of the more effective ministers in the Ardern Cabinet but he might have been stretching it a bit in implying the high prices are due to the government.
When Labour’s Kiritapu Allan asked him what action the government is taking to help this sector, he responded: Continue reading “Yep, farm prices are booming and the outlook is bright – but cockies might quibble with O’Connor about the causes”