New Zealand Agribusiness Report Q1 2012

BMI View: Despite recent signs of temporarily slowing whole milk powder import demand from China, we still expect New Zealand's dairy sector to continue its strong growth pattern of recent years, mainly thanks to steady export opportunities. We expect the livestock sectors to continue in the medium term on high meat prices and increased export demand, particularly in South Korea and Indonesia. Finally, we maintain our view for the grains sector to remain small, with self-sufficiency in corn, but small imports of barley and wheat to continue over our forecast period.

Key Trends

- Milk production growth to 2015/16: 12.1% to 19.1mn tonnes. 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 see significant dairy consumption growth out to 2016.

- Barley consumption growth to 2016: 10.4% to 450,500 tonnes. These are closely correlated to our outlook for the livestock and dairy sectors with
much of the crop (the majority in the case of barley and corn) consumed as animal feed.

- Poultry production growth to 2015/16: 12.3% to 172,600 tonnes. This will come on the back of Increased domestic value-added production, which lifted the fortunes and potential profitability of the sector, encouraging more farmers to consider this industry sub-sector.

- 2012 Real GDP Growth: 1.7% (up from 1.0% in 2011; predicted to average 2.2% from 2011 until 2016).

- 2012 consumer price inflation: 2.6% for 2012 (down from 3.9% in 2011).

Industry Developments

New Zealanders still prefer poultry to beef and pork as they eat about 31kg of chicken per person per year. This is because chicken tends to be cheaper than beef and pork but also because it is an healthier and easier to make source of protein. This underpins our forecast for the poultry industry to outperform the beef and pork sector in New Zealand over our forecast period. Indeed, we forecast higher production growth of 12.3% by 2015/16, boosted by higher consumption growth of 13.9% over the same period. Moreover, as we forecast feed prices to moderate in the medium term, we believe the profitability of the sector will increase, which should lead to greater investment and in turn higher production.

Wheat production in New Zealand has never fully recovered from the liberalisation of the wheat market in 1987. After wheat imports were allowed to freely enter the country that year, production plummeted, dropping from 379,714 tonnes in 1986 to 134,994 tonnes in 1989 as the area planted with wheat fell by almost 60%. Production of barley and wheat, the country's most significant grain crops, is centred in the Canterbury region on the South Island. In 2008, the region produced 87% of New Zealand's total wheat crop and 69% of the barley crop. Corn production is based mainly on the North Island. The majority of acreage is in the regions of Waikato, the Bay of Plenty and Gisborne, according to Statistics New Zealand.

Despite a poor earnings showing in its Australia and New Zealand business division, multinational dairy cooperative Fonterra recorded a strong 12.6% growth in its overall profit for the year ending July 2011. This resilience in overall profitability can be attributed to a successful hedging of its foreign exchange exposure and its ability to pass on the inflationary burden to its emerging market consumer base. Over the coming quarters, the underlying demand dynamics in high-growth markets such as Asia and Africa should continue to provide some cushion against the softer domestic demand conditions in Australia and New Zealand, in turn lending some upward support to Fonterra's performance.

Business Monitor International's New Zealand Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on New Zealand's agribusiness service. SHOW LESS READ MORE >

Executive Summary
SWOT Analysis
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Industry Forecast Scenario
New Zealand Livestock Outlook
Table: New Zealand Poultry Production & Consumption, 2011-2016
Table: New Zealand Pork Production & Consumption, 2011-2016
Table: New Zealand Beef & Veal Production & Consumption, 2011-2016
Table: New Zealand Poultry Production & Consumption, 2007-2012
Table: New Zealand Pork Production & Consumption, 2007-2012
Table: New Zealand Beef & Veal Production & Consumption, 2007-2012
New Zealand Grains Outlook
Table: New Zealand Wheat Production & Consumption
Table: New Zealand Corn Production & Consumption
Table: New Zealand Barley Production & Consumption
Table: New Zealand Wheat Production & Consumption, 2007-2012
Table: New Zealand Corn Production & Consumption, 2007-2012
Table: New Zealand Barley Production & Consumption, 2007-2012
New Zealand Dairy Outlook
Table: New Zealand Milk Production & Consumption, 2011-2016
Table: New Zealand Butter Production & Consumption, 2011-2016
Table: New Zealand Cheese Production & Consumption, 2011-2016
Table: New Zealand Whole Milk Powder Production & Consumption, 2011-2016
Table: New Zealand Milk Production & Consumption, 2007-2012
Table: New Zealand Butter Production & Consumption, 2007-2012
Table: New Zealand Cheese Production & Consumption, 2007-2012
Table: New Zealand Whole Milk Powder Production & Consumption, 2007-2012
Commodity Price Analysis
Monthly Grains Update
Corn
Rice
Soybean
Wheat
Monthly Softs Update
Cocoa
Coffee
Palm Oil
Sugar
Macroeconomic Forecast
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Table: New Zealand - Economic Activity, 2008-2015
Global Food & Drink View
New Zealand Agribusiness Report Q1 2
Business Monitor International Ltd Page
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BMI Forecast Modelling
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