Primary industries drive COVID recovery
Primary sector exports are on track to grow by $1.7 billion on last year helping underpin NZ’s Covid-19 recovery, says Agriculture Minister Damien O’Connor.
“Overseas consumers are now more than ever looking for healthy, New Zealand-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,” Damien O’Connor said.
“Our farmers and growers are in a strong position to help us reboot our economy. Along with the sector, the Government is focused on creating more demand, pursuing greater market opportunities to generate higher export returns and growing rural communities with new jobs.
“In lieu of the June 2020 edition of the Situation and Outlook for Primary Industries (SOPI), the Ministry for Primary Industries today released the Economic Update for the Primary Industries, showing for the year-to-date primary industries export revenue is tracking 4.5 per cent ($1.7 billion) higher than the previous year.
- Dairy exports were particularly strong since the start of March, up $512 million (12 per cent) compared to 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 per cent) on last year since the start of March.
Fisheries Minister Stuart Nash said the Chinese market for rock lobster was significantly affected by COVID-19, but is now showing signs of recovery as seafood markets begin to reopen.
“New Zealand kaimoana enjoys an excellent reputation around the world, built on the hard work of generations of fishing operators. The almost $2 billion in export revenue it brings into the country will be particularly important as we recover from the effects of COVID-19.”
Forestry Minister Shane Jones said that 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.
“This has been an incredibly challenging time for the sector and 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 multibillion-dollar sector will play a significant role in the economic recovery”.
Damien O’Connor said the report also provides a snapshot of how Covid-19 disrupted New Zealand’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.
“We are committed to supporting our vital primary sector continue to fetch value and create jobs – including $19.3 million to place 10,000 people into primary sector jobs, $127 million for jobs to help control wilding pines and get populations of wallabies under control and the government’s $110 million worker redeployment package, to create employment for people who have lost their jobs.
“The strength of New Zealand’s primary sector coupled with the success of our health response to COVID-19 gives us a head-start on the world as we get our economy moving again,” Damien O’Connor said.
The full report is available here.
- 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 foodservice 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 per cent 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 New Zealand moved to Alert Level 3 in late April, following a total harvest volume in April of just 377 thousand cubic metres, 87 per cent down from the same period in 2019. The good news is that the latest market reports show higher log prices in China and lower inventories at Chinese ports.
MPI is starting to get a picture of the impacts of COVID-19 and beginning to plan the road to recovery for the primary sector.
The Economic Update for the Primary Industries is in lieu of the June 2020 edition of the Situation and Outlook for Primary Industries (SOPI). MPI expects to include further analysis on the economic impacts of COVID-19 in future publications produced by their Economic Intelligence Unit.