The ongoing strength of the New Zealand dollar continues to undermine agricultural exporters in general. The US’ central bank, the Federal Reserve, may yet hold the key to spilling some wind from the sails of the kiwi if the US dollar were to strengthen after a rate hike, albeit not until the end of the year.
Westpac senior economist Anne Boniface said, while international dairy prices had "improved significantly" in recent months, the strong kiwi continued to take the gloss off farmgate earnings.
"Not only for New Zealand dairy farmers, but also for agricultural exporters more generally," she said in her fortnightly agri-update.
The kiwi remained well above 70c against the US dollar, despite the Reserve Bank last month strongly signalling it was likely to cut interest rates further from here.
Mrs Boniface correctly guessed that the Reserve Bank would leave the official cash rate unchanged last Thursday, at the record-low 2%, but maintained that "when push comes to shove" the Reserve Bank would cut the rate in November to 1.75%.
Mrs Boniface said the horticulture sector, and kiwifruit in particular, had been the standout performer of New Zealand’s agricultural exporters lately.
"Export volumes and prices are both up strongly on the back of robust consumer demand and the success of new cultivars, developed following the [bacterial kiwifruit vine disease] PSA, were leading to record returns to growers," she said.
Zespri expected to sell 82 million trays of green and 47 million trays of SunGold kiwifruit this season, with the gold variety in particular likely to see solid demand from key markets, she said.
