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Investing In Agriculture In New Zealand

Post a Comment April 26, 2009 – 2:30 pm |   | Permalink |  Print This Post |

From 2008 to 2012

A major source of the economic boom in New Zealand’s economy has been significantly attributed by record international prices of dairy products. In financial year ending March 31^st 2008, the earnings from the exporting of agriculture and forestry went up by a whopping 8.4% to $23 billion. In today’s economical state of affairs that is definitely a bright spot in a dark landscape.

Agricultural and forestry products remain very buoyant; though face the perils of a strong New Zealand dollar, rising labour and production costs and the ever changing climate. The sheer uncertainly and unpredictability of all these unforeseen forces, could affect market prices.

Price Instabilities

Dairy prices enjoyed a surge in 2007, but hit a peak in the early months of 2008. Meat prices enjoyed modest growth but were recorded slightly behind the curve. Log prices have enjoyed a steady and sustained growth that dates way back to early 2007.

Figure 2.1: Prices for New Zealand’s major forestry and agricultural commodities in international markets, 2003–2008

Prices for New Zealand’s major forestry and agricultural commodities

Notes

USD- United States Dollars

UKP – United Kingdom Pounds

CIF – Cost, insurance and freight or charged in full. The vendor is required to pay the transportation fees to get the goods to the specific destination as specified in the contract.

Sources: US Department Of Agriculture, Meat Industry Association, Meat & Wool New Zealand and Pacific Forest Products.

Gains made on these commodities are driven in part by the rapid surge in prices of all other commodities as a whole. Metals, grains, and fossil fuels have all enjoyed a steady gain in price. A common factor driving the markets in a positive fashion is the demand from countries with rapidly developing economies and larger populations. The sheer pace of these rapidly changing nations, coupled with the scale of it, heavily drives commodity prices upwards.

Climate Factors

Due to a lengthy and hard hitting drought, that dragged on throughout the summer and fall months New Zealand suffered some unfortunate side effects. Feed shortages were one of the biggest and harshest issues to deal with. Costs of secondary feeding methods were unaffordable to most farmers and caused lower grade productions across the board. Prices rose to accommodate the shortage, and farmers found themselves having to reduced stock and will find themselves a little lighter in stock going ahead for a few more years due to the ripple effect the drought caused.

Animals and livestock won’t be near as bountiful and will be in poorer condition as spring rolls around which will affect many secondary industries that rely on livestock or livestock by products in one way or another.

Figure 2.2: New Zealand climatic conditions, comparing historical with year ended 31 May 2008

Figure 2.2: New Zealand climatic conditions, comparing historical with year ended 31 May 2008

Source National Institute of Water and Atmospheric Research (NIWA).

Domestic Productivity

Down the road, New Zealand`s economic growth is going to be determined in part by the level of productivity achieved. Changes can be made to maximize the productivity and stay ahead of the market. Better tools, more efficient methods can and will not only lead to better yields, but can lower costs which in the end when profit goes up, and costs go down, is a very good thing.