New Zealand: farmers look for volume as prices ease

Farm incomes are expected to drop next year but the good news is that returns are expected to pick up in 2007 and grow strongly through to 2009.

The Ministry of Agriculture and Forestry's annual forecast says export receipts for agriculture and forestry will drop by $300 million next year to $15.5 billion.

Strong international prices for dairy, beef and lamb have peaked and the high dollar will hinder exporters.

But as the dollar depreciates and production volumes grow, things are expected to pick up again in most sectors from 2007.

Total primary industry export returns are tipped to grow to $18.7 billion by 2009.

MAF's Situation and Outlook for New Zealand Agriculture and Forestry forecast says tougher times lie ahead for all sectors next year.

"The supply-and-demand conditions that favoured much of the pastoral sector are expected to dissipate over the next 12 months."

That "in combination with higher costs and greater exposure to the high dollar will undermine future profitability".

MAF says large volumes of produce have depressed world horticultural prices so the sector has felt the worst effects of the high exchange rate.

Export prices fell this year and are expected to fall again next year. Despite that, the outlook for kiwifruit and wine growers remains relatively stable but apple growers face an uncertain future.

Apple production next year and in 2007 is expected to fall as growers respond to the difficult conditions - either by leaving the industry or moving to develop new varieties.

Wine export volumes are still rising rapidly and are expected to keep doing so.

The forestry sector still faces many of the challenges that have plagued it for most of this decade - a strong dollar, increasing competition, higher fuel, labour and shipping costs.

But although the short-term outlook remains subdued, the expected depreciation of the dollar and improved export volumes, as new trees mature, should improve profitability for the sector, the report says.

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