New Zealand Commodity Dominate Agribusiness Sector

Commodities including corn, wheat, rice, sugar, cocoa, coffee, soy and milk commodity 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.

For the long-term health of New Zealand's meat producing sector, new export markets will have to be found and developed. Given the GDP expansion in other countries in Asia such as the Philippines, Malaysia, Indonesia, and Thailand, meat consumption is forecast to expand in those places over the medium term as well. Given that New Zealand is involved in free trade agreements with Asia, its proximity and preferential access to these market should give its exporters an advantage when trying to sell their products. The sector will also benefit from free trade agreements with the gulf coast countries, where per capita beef consumption has risen substantially over the last decade."

New Zealand remains a global dairy giant. It is the world's largest exporter of butter and the second largest exporter of cheese and whole milk powder (excluding trade within the EU). In 2011, we expect modest fluid milk production growth of 0.4% y-o-y, as the industry, particularly production on the North Island, has been badly hit by drought, resulting in us predicting output of 16.7mn tonnes. Through to 2014, however, we are forecasting production growth of 8.9%, up to 18mn tonnes. From an already high base, this says much about the industry's efficiency and capacity to exploit rebounding global dairy demand.

Wheat commodity consumption growth to 2014: 20% to 708,000 tonnes. Our forecasts for grains consumption are closely correlated to our outlook for the livestock and dairy sectors with much of the crop consumed as animal feed. Our positive growth forecasts for livestock factor into our forecasts for steady demand growth for grains over the next four years.

Poultry production growth to 2014: 24% to 190,000 tonnes. Increased domestic value-added production has lifted the fortunes and potential profitability of the sector, encouraging more farmers to consider this industry sub-sector.

Beef consumption growth to 2014: 6% to 124,000 tonnes. Beef consumption will continue a declining trend over the last decade as poultry is seen as a healthier alternative. This comes as many governments in developed markets try to mitigate rising obesity rates.

2010 Real GDP Growth: 1.8% (up from -0.1% in 2009; predicted to average 2.5% from 2010 until 2014).

Consumer Price Inflation: 2% year-on-year (y-o-y) in July 2010 (up from 2% y-o-y in July 2009).

New Zealand has a relatively small grains sector which is dwarfed, both in terms of output and economic importance, by the vast dairy and livestock sectors. New Zealand is, in an average year, self-sufficient in corn but has to import small quantities of barley and around half of its wheat needs. Generally, area harvested for grains has fallen slightly over the past decade, but yields have increased overall. Beyond the near term, we expect production to remain fairly stagnant to the end of our forecast period in 2013/14.

Agriculture will continue to be dominated by its global leading dairy sector, whose exports contribute a significant source of revenue to the economy as a whole. As a developed country, consumption growth will be slow across most sectors, with the exception of poultry. Over the forecast period, the industry will see expanding export opportunities, particularly for the livestock sector. However, there are risks that increased environmental compliance costs could make New Zealand livestock more expensive than its export competitors. Nonetheless, the industry, led by the ubiquitous dairy sector, will see moderate production growth over the long term.