2013-12-30 04:39:46 - New Food market report from Business Monitor International: "New Zealand Agribusiness Report Q1 2014"
We believe that increased access to international markets, particularly Taiwan and China, will prove to be the prime growth driver for the agribusiness sector in New Zealand over the medium to long term. This will be supportive for both the dairy and the livestock segments. However, we also warn that vulnerability to weather conditions, lack of skilled labour, tightening regulations and the consequent increase in operating costs could put a dent on growth prospects.
* Milk production growth to 2016/17: 6.0% to 21.8mn 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 enjoy significant dairy
consumption growth to 2016/17.
* Milk powder production growth to 2016/17: 14.8% to 1.5mn tonnes. Across all the dairy segments, export opportunities (particularly to China) will be the main growth drivers over the medium term.
* Beef production growth to 2016/17: 6.3% to 663,000 tonnes. The dairy sector will continue to limit the amount of cattle available for slaughter.
* BMI universe agribusiness market value: US$10.5bn in 2014 (up slightly from the expected 10.4bn in 2013; forecast to grow annually by 2.4% on average to 2017)
* 2014 real GDP growth: 2.0% (down from 2.2% expected in 2013; forecast to average 2.4% from 2014 until 2017).
* 2014 consumer price inflation: 2.2% (up from 1.4% in 2013; forecast to average 2.4% from 2014 until 2017).
Full Report Details at
- www.fastmr.com/prod/754612_new_zealand_agribusiness_report_q1_20 ..
New Zealand, along with Australia, is poised to benefit significantly from the exponential growth in China's beef imports in recent years, jumping almost eight-fold in five years, from 23,000 tonnes in 2009 to an expected 175,000 tonnes in 2013. Although beef represents only 8% of China's total meat demand, the low potential production growth and rising demand provides opportunities for exporting countries. In 2011, New Zealand exported 24,924 live cattle valued at NZD63.2mn to Chinese farms; this rose to 38,232 head valued at NZD100.7mn in 2012. There was further good news for New Zealand's livestock segment in May 2013, when Chinese authorities cleared certificates for New Zealand meat, making way for the segment's access to the Chinese market.
Following the news of various countries (China, Russia, Kazakhstan and Belarus) imposing a temporary ban on certain (or all, in the latter three countries) dairy goods from New Zealand due to contamination concerns, both the Ministry of Primary Industries and the government decided in August 2013 to launch two separate enquiries into the possible missteps that Fonterra may have taken in the months leading up to the final news release. Although a large proportion of the affected products are believed to have been successfully recalled, with the source of the problems reportedly due to problems at one whey protein factory as opposed to systemic issues, we believe that the government is likely to tighten regulation and requirements in order to signal its firm commitment to ensuring food quality. We see a high chance of an increase in food security, which will likely translate to higher costs of compliance for food-related farmers and manufacturers.
Leaving the contamination issue aside, in September 2013 Fonterra increased its price paid to farmers for the third time in two months as a result of strong demand from China, reported AgriMoney. The company will pay its producers a record US$6.84 per kilogram of milk solids this season, a US$0.41 increase. Fonterra said continuing strong international prices for dairy, particularly whole milk powder, has been driven by robust demand from Asia, especially China. The move falls in line with our view put across in late 2012 that higher prices in 2013 could prompt Fonterra to set higher payouts during the year.
In the subsequent month, the company also revealed its plans to invest NZD72mn (US$60.72mn) into expansion of its Clandeboye mozzarella production facility in Canterbury, New Zealand. The move aims to improve the company's foodservice capabilities across the world for its foodservice category. The expansion, which will start in mid-2014 and is expected to conclude by September 2015, will increase Fonterra's individual quick frozen grated mozzarella production capacity at its two New Zealand-based facilities to more than 50,000 tonnes annually.
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