Weathering the storm

Total export revenue from New Zealand’s primary sector exceeded revenue from the previous year, despite the COVID-19 pandemic. Some farm produce exporters have even expanded into new markets as a result.

The cost of shipping has skyrocketed, however and the logistics of getting products to international markets remain challenging in 2021. Decreased international demand for some farm exports such as New Zealand venison, especially demand from hotel restaurants in Europe and America due to COVID-19 closures, is also having an impact. A new study by AgResearch and its partners revealed that 47 percent of New Zealanders viewed the effect of the pandemic on their farms or businesses as negative. A further 37 percent said the effect was neutral, in the period through to June 2020, which included national lockdowns. It is fair to say that the tone of this report is one of surprise and that AgResearch was not expecting such findings, describing the pandemic and lockdowns as having “relatively little impact”. Much of New Zealand’s primary sector was able to continue working through the COVID-19 lockdowns and unlike some other nations, its performance held up well. “It’s clear from our analysis that the in-built ability to cope with adversity, find new ways of doing things and get on with the job, were important in how farmers and their supporting industries performed so well,” AgResearch Senior Scientist Dr Val Snow says. “Many farmers were already dealing with drought conditions but were able to manage through the extra difficulties. We’ve seen those in other countries not fare as well. Some Kiwi farmers found being required to stay on their farms through COVID-19 restrictions meant they were actually more focused on their core tasks and their family life.” Some respondents noticed a change in attitude among the public around how they value the security of food production and therefore the important role farmers play, at the top of the supply chain. While the majority of Kiwi farmers remain upbeat despite the challenges of 2020, it isn’t all peaches and cream. While agriculture was not directly affected, the reduction in tourist arrivals substantially affected demand for agricultural products through the restaurant and fast food trade, both of which were shut down. The main non-labour issues for farm produce exporters were air freight challenges of high-value products and the loss of key markets. More broadly, some sectors were concerned with impending shortages of some animal feed components, according to the Ministry for Primary Industries. The Government intervened by providing NZD $303 million of financial support for international air-freight carriers to ensure high-value exports could reach global markets and essential imports could arrive in New Zealand. Initially, 53 weekly flights were scheduled to main export destinations and at the beginning of August 2020, the schedule was increased to 70 flights per week. Animal feed availability was a key concern for livestock farmers, particularly because the pandemic coincided with a widespread autumn drought. COVID-19 and related measures resulted in some farmers having to hold stock on-farm through the 2020 autumn, when slaughter was delayed due to processing constraints. The Government worked to ensure that critical services and essential imports (e.g. animal feed, farm machinery) to farms and food production systems were provided. “Although the outlook is more positive now with access to vaccines, many of those we heard from expect impacts of the pandemic to linger for some time,” Dr Val says. Looking more closely at the revenue side of things, if we dive deeper into New Zealand export performance by farming sector in 2020 vs 2019, a positive picture also emerges.

Dairy remains strong

Dairy has a long-term trend of export value growth, growing by around 7 percent on average per year since 1989. Despite the pandemic presenting some logistical challenges, momentum did

not slow markedly for New Zealand dairy exports during 2020, according to the Sense Partners Dairy’s Economic Contribution 2020 report, produced for DairyNZ and Dairy Companies Association of New Zealand (DCANZ). DairyNZ Chief Executive Dr Tim Mackle says that while some of New Zealand’s key sectors have been hit hard by COVID-19, the dairy sector has proven extremely resilient through this period of uncertainty and is well-positioned to continue playing a key role in contributing to New Zealand’s economy. “There have been many challenges for dairy farmers during the pandemic, however they stepped up and continued to produce food for Kiwis and our global customers and much-needed export income for New Zealand,” Dr Tim says. “Recent Sense Partners analysis shows the sector is delivering $20 billion in export value. Dairy also provides longterm stability for our communities and regional economies. Export earnings translate to well-paying jobs, but also support farmers and dairy companies to purchase more than $22.5b worth of goods and services from other industries. “Dairy’s sustained economic contribution is proving to be a key factor in the country’s COVID-19 recovery, with every dollar dairy brings into our country being critical as New Zealand rebuilds its economy and communities after the impact of the global pandemic.” New Zealand dairy export value has grown from more than $2 billion per year in 1990 to $19.7 billion in the year to June 2020. While a significant proportion comes from milk powder products, almost half of the export value comes from other products. In the year to June 2020 the value of dairy exports was roughly the same as that from meat, wood, fruit, wine and seafood combined. It’s also interesting to note that New Zealand exports more cheese ($2.1 billion) than wine ($1.9 billion) or seafood ($1.7 billion). It seems that even a global pandemic cannot stop the growth of the New Zealand dairy sector.

Beef and lamb stand firm

Despite COVID-19 related processing restrictions and a widespread drought in the first half of 2020, sheep and beef farmers achieved a near record 130.3 percent lambing percentage.

WORRYING ABOUT INCREASING GROWTH WITH REDUCED ‘N’?

The dairy sector has proven extremely resilient through this period of uncertainty.”

| DairyNZ Chief Executive Dr Tim Mackle

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Lamb and sheep export volumes, however, are expected to be more significantly impacted by the follow-on impacts of the drought, due to lower animal weights and the retention of sheep for breeding to rebuild stock numbers. These are the main findings of the Beef + Lamb New Zealand (B+LNZ) Lamb Crop Outlook report for 2020 that measures lambing performance and forecasts lamb and sheep exports for 2021. New Zealand prime meat exports are suffering due to ongoing restaurant closures across the globe, which was a key source of demand. Export results are expected to be a mixed bag, with lambs processed for export looking to increase but sheep exports to fall. The number of lambs processed for export in 2020-21 is estimated to decrease 4.5 percent to 18.25 million head. The number of adult sheep processed for export is estimated to decline 10.8 percent to 3.15 million head in 2020-21. “Despite the challenges of 2020 including drought and COVID-19, sheep farmers demonstrated why they are the world’s best, their resilience and the agility of their farming systems has meant they’ve performed outstandingly and this should be a real point of pride for our sector,” B+LNZ’s Chief Executive Sam McIvor says. “The severity of the impact of the autumn drought on the lamb crop in the North Island was partially offset, by excellent climatic conditions at lambing.” From a market perspective, early season pricing has been warmly received by farmers and though there is uncertainty related to international economic conditions, the ongoing impact of COVID-19 and more latterly shipping logistics, the underlying fundamentals remain solid, according to B+LNZ’s New Season Outlook 2020-21. “The average export values are expected to be supported by the positive market fundamentals – there’s strong underlying demand for meat – and meat from safe and natural farming sources like New Zealand. Prices are forecast at similar levels, or slightly above, 5 year averages.”

Fruit still flying

Horticulture export growth continued its upward trend with 6.5 percent growth in the latest year since 2019 – and 2 year growth of 25 percent in export earnings since 2018 – according to the New Zealand Horticulture Export Authority (HEA) New Zealand Horticulture – Barriers to Our Export Trade report. New Zealand’s horticultural exports were worth $4.52 billion in 2020 and about 65 percent of New Zealand’s total horticultural production of fruit and vegetables is exported. “The global COVID-19 pandemic has impacted trade from early 2020 on a scale not previously encountered,” Horticulture Export Authority Chief Executive Simon Hegarty says. “In the timeframe of this report the actual horticultural trade figures for the year ended 30th June, 2020 were up year on year by 7 percent. This could have been significantly higher had there not been trade disruption from March 2020. “While COVID-19 has resulted in no formal restrictions on market access for the majority of exported and imported goods, it is placing significant pressure on global supply chains. “With some countries turning inward as a result of the pandemic disruption, it is important not to back-track on progress made. “Maintaining access to existing markets while also opening up new markets and removing tariffs are essential to the continued export growth that drives New Zealand’s economy," Simon says. "Kiwifruit and apples are the dominant horticultural crops accounting for 75 percent of the total export value in 2020. Kiwifruit accounts for over $2.5 billion (56 percent) of the value of the horticultural economy," Simon says. Kiwifruit exports exceeded $2.5 billion in 2020, representing a 36 percent increase in value from 2018. Much of the growth is due to a 69 percent increase in export value to Japan, which has replaced the EU as the number one export market for kiwifruit. Apple exports were $881 million in 2020, this is a 20 percent increase. Most of the growth has been to China, which increased 104 percent and to Vietnam, which increased 117 percent.

Key export markets

• Regional free trade agreements have removed tariffs in many of

New Zealand’s key markets such as China, Japan, Malaysia, South

Korea, Taiwan and Vietnam and the total cost of tariffs on horticultural exports decreased 29 percent in 2020.

• The EU remains New Zealand’s most valuable export market ahead of Japan and China. Export earnings between 2018 and 2020 rose 13.6 percent. • In 2019 and 2020 Japan was the second largest market, moving above China into third place. • Australia and Taiwan are placed fourth and fifth, respectively.

Vietnam is showing steady growth, with export value doubling between 2018 and 2020.

• Over the longer 10 year timeframe,

China and Vietnam have been the big upward movers, while exports to

Japan and Taiwan have doubled.

The EU market has increased by more than 50 percent however, Australia has only shown modest growth.

WHATEVER’S ON YOUR MIND THIS AUTUMN, WE’RE HERE TO HELP.

From one day to the next autumn can bring different challenges to your farm, but together we can help you face them. Our team of highly knowledgeable experts and partners stand behind your local Farmlands team with the expertise they need to help with whatever autumn throws at you.

WHO’D HAVE THOUGHT SHOVING PLASTIC INTO A HOLE IN THE GROUND WAS PROGRESS.

In truth, turning plastic waste into fence posts is nothing short of ingenious. It’s a clever idea that Jerome Wenzlick has turned into a thriving business through dogged perseverance. Not only do the plastic posts he now produces outperform their wooden counterparts, they’re helping to solve a big environmental problem. Each post uses around 400 plastic bottles and 1,500 plastic bags that would otherwise end up in a landfill. It’s a really good example of the progressive nature of New Zealand’s farmers. As more and more rural businesses take on challenges like this, FMG is right alongside them to help manage the risks and move forward. When you do things differently, it’s great to know someone like FMG has got your back. To hear the full story of FuturePost’s journey, go to fmg.co.nz/futurepost