TL;DR: The NZ primary sector shows signs of recovery. Dairy prices rebound, but meat prices struggle. Challenges remain, but an improved global economic outlook offers hope for modest price increases.
ASB’s latest report suggests a brighter future for New Zealand’s primary sector.
Prices for important commodities have risen, and forecasts have improved slightly.
Changing expectations about monetary policy is a big reason for the more positive growth outlook, according to ASB economist Nathaniel Keall. Markets are more confident that rates won’t need to go as high, and the global economy might achieve a “soft landing.”
Dairy Prices Rebound, but China’s Absence Felt
- Dairy prices have recovered by about 22% since their lowest point earlier in the season.
- However, they remain around 30% below the previous year’s peaks.
- China, the world’s largest dairy importer, has purchased less than 40% of the whole milk powder (WMP) at recent auctions, compared to a historical average of 55-60%.
ASB has revised its milk price forecast for the 2023/24 and 2025 seasons, with the latter now at a healthy $8.30 per kgMS.
Meat Prices Struggle but Hope on the Horizon
The meat sector faces challenges, with overall protein prices hitting the hardest. Keall attributes this to the pressures of the cost of living, which causes consumers to eat less meat. This trend is expected to continue for some time.
However, there is hope. As pessimism about the global economy eases, meat prices may rise modestly towards the end of the season.
Challenges for NZ Lamb Industry
- Australian lamb production has increased by a whopping 13%, leading to oversupply and a weak lamb market.
- China’s growth remains sluggish as the country tackles domestic economic issues.
Despite these challenges, the ASB report offers hope for New Zealand’s primary sector. As global economic conditions improve, the sector may see a welcome boost in the coming months.
