Fast Market Research recommends "New Zealand Agribusiness Report Q1 2013" from Business Monitor International, now available

Boston, MA -- (SBWire) -- 12/24/2012 --The agribusiness sector will remain a significant driver of New Zealand's economy, as it is a key source of exports earnings. We believe the country will have to ramp up investment in infrastructure in order to stay ahead of the growing competition coming from lower-cost countries in Asia and Latin America. In the shorter term, we expect 'super flush' dairy production to come to an end with the return of normal pasture conditions, while the livestock industry will show mild output growth.

Key Trends

- Milk powder production growth to 2016/17: 5.3% to 1.3mn tonnes. Across all the dairy segments, export opportunities (particularly to China) will be the main growth drivers over the medium term.
- Milk production growth to 2016/17: -3.0% to 19.3mn tonnes. The drop is due to base effects. Given the small domestic consumption base and the high productivity of the sector, long-term expansion will mainly come from export opportunities, particularly to Asia and the Middle East, which are forecast to register significant dairy consumption growth to 2016/17.
- Poultry production growth to 2016/17: 14.6% to 177,600 tonnes. We expect the poultry segment to be an outperformer among the livestock sector. Increased domestic value-added production has lifted the fortunes and potential profitability of the sector, encouraging more farmers to consider poultry farming.
- 2013 real GDP growth: 2.2% year-on-year (y-o-y), up from 1.4% in 2012; forecast to average 2.3% from 2012 until 2017.
- 2013 consumer price inflation: 1.8% (up from 1.5% in 2012; forecast to average 2.2% from 2012 until 2017).
- 2013 central bank policy rate: 2.50% (identical to 2012; forecast to average 3.80% from 2012 until 2017).

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Key Developments

Fonterra, the world's biggest dairy exporter and main producers' cooperative of New Zealand, will hand out in 2012/13 the lowest payouts to farmers since 2008. The price paid to farmers will be NZD5.65- 5.75/kg, down 31.5% from the record NZD8.25/kg in 2010/11. The decision is based on the continued strength of the New Zealand dollar, which is eroding profits from rising commodity prices. Although we expect front-month CME milk prices to average higher in 2013 (at US$18.00/cwt), farmers are unlikely to reap the benefits of higher milk prices. The impact on GDP could be significant given the fact that the dairy sector accounts for 8% of New Zealand's total GDP.

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