• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Contact Us
  • WHAT FEDS DOES
  • Download FEDSVoice
FedsNews

FedsNews

FedsNews

  • National
    • Agri Business
      • Maori Agri Business
      • Marketing
      • Agri Tech
    • Biosecurity
      • Mycoplasma Bovis
      • Pest Control
    • Environment
      • Climate Change
      • Water
      • Biodiversity
    • Infrastructure
      • Transport
      • Shipping
      • Freight
      • Roading
      • Telecommunications
    • Arable, Grains & Seeds
    • Dairy
    • Forestry
    • Horticulture
    • Meat
    • Wool
  • Local
    • Councils
    • Rates
    • Compliance
  • Politics
    • Economy
    • Elections
    • Education
    • Exports
    • Immigration
    • Trade
    • Tax
  • Opinion
  • People
    • Community
    • Events
    • Employment
    • Health and Wellness
    • Training
    • On Farm
      • Adverse Events
      • Animal Welfare
      • Health and Safety
      • Awards
      • Traceability
      • NAIT
      • Welfare
    • Farm Stories
  • Podcasts
  • Videos

Economic Week – April 1

April 1, 2021 by Simon Edwards

by Nick Clark, Manager General Policy

Feds urges fiscal responsibility

On Wednesday Federated Farmers presented its submission on the Budget Policy Statement to Parliament’s Finance and Expenditure Committee. 

Read here to see what National President Andrew Hoggard told the Select Committee but the gist of it is that he urged caution on any spending spree in the upcoming Budget.

Andrew also emphasised that while Federated Farmers support the concept of ‘wellbeing’, which has underpinned recent Budgets, we can’t have all the things we want if we don’t have a productive and competitive economy and responsibly managed government finances.  

Nick Clark

Federated Farmers is concerned that the Budget’s fiscal strategy has been watered down so Andrew stated that we want it improved by:

  • Adding a percentage of GDP to the net core Crown debt objective of the Fiscal Strategy, preferably for it to stabilise at no greater than 40% of GDP before reducing.
  • Ensuring the operating balance objective works towards the restoration and maintenance of sustainable operating surpluses across an economic cycle and as economic conditions allow.
  • Ensuring investments are prioritised and ensuring spending is phased, controlled, and directed to maximise its benefits.
  • Include a commitment to hold operating spending to within its recent historical range of spending to GDP ratio (around 30%).

Andrew had a good hearing from the Committee with MPs expressing appreciation for the work of farmers in helping New Zealand through COVID-19 and he and I answered questions around wellbeing versus fiscal responsibility, rural mental health, bank debt, and tax changes.

Red meat sector resilience

Beef + Lamb New Zealand’s (B+LNZ) Mid-Season Update 2020-21 was released this week.  Although the current 2020/21 farming year will see a hit to farm profit, the Update highlights the resilience and adaptability of New Zealand’s red meat sector as solid market fundamentals continueto support global demand.

Export receipts for sheepmeat (i.e., lamb and mutton) for 2020-21 are forecast to decline by 12.4%, or $526 million, to $3.73 billion (FOB).  Lamb export receipts are forecast at $2.89 billion, down 13.7%.  The decline is driven by a 4.4% drop in the volume of lamb meat exported and a 9.8% drop in the average value of exports to $9,763 per tonne.  The value of lamb co-product exports is forecast to fall 8.0% to $142 million.  Mutton exports (including co-products) are forecast to fall 7.1% to $699 million.

Farm-gate returns are forecast to average $122 a head for both prime lambs and prime sheep in 2020-21, the first season in which sheep prices have been as high as lamb prices.

Turning to beef (i.e., beef and veal), its total export revenue is forecast to be $3.73 billion (FOB), down 13.8% on 2019-20.  Beef meat exported is forecast at $3.24 billion, down 14.9%. The decline is driven by a 2.6% decline in the volume of beef meat exported and a 12.6% decline in average value of exports to $7,156 per tonne.  Co-products are forecast to fall 6.0% to $481 million.

In 2020-21, the annual average all beef class farmgate price is estimated to be down 5.4%.

B+LNZ say that for both sheepmeat and beef, continuing disruption from COVID-19 and the sharp appreciation of the NZ Dollar against the US Dollar are key drivers of the subdued outlook. High-value lamb continues to suffer from weak demand as the pandemic restricts activity in the foodservice sector while the global beef trade is expected to grow increasingly competitive in 2020/21 with a strong presence of South American beef. On the brighter side demand for both sheepmeat and beef will be supported by continued strong demand from China for meat protein because of Asian Swine Flu-induced pork shortages and growth in household incomes in both China and Asia more generally.

Looking at the impact on-farm, gross farm revenue for the 2020-21 farming year is forecast to average $568,000 per farm – down 8.8%. After a couple of strong years in 2018-19 and 2019-20, all revenue accounts are forecast to decline to levels below 2017-18. Cattle revenue decreases 4.2% to $155,700 per farm and sheep revenue is forecast to decrease by 12.3% to $271,300 per farm for 2020-21. 

Farm expenditure is estimated to decrease 4.9% to average $443,800 per farm for 2020-21 as farmers adjust expenditure to expected lower revenue.  The net effect is farm profit before tax is forecast to be down 20.5% to an average $124,200 per farm.

There is a wealth of information in the Update.  Check it out.

Rural confidence jumps

Farmer confidence increased strongly in March and is back in positive territory, according to Rabobank’s quarterly Rural Confidence Survey.

The survey found net farmer confidence in the agricultural economy rose sharply to a net 10% expecting it to improve over the next 12 months, up 33 points from December when a net 23% expected it to worsen.  29% expect economic conditions to improve (up from 16%) and 19% expect them to worsen (down from 39%).  Those expecting conditions to stay the same rose slightly to 49% (up from 44%). 

Sentiment improved for dairy farmers and sheep and beef farmers alike.  Unsurprisingly, dairy farmers were buoyed by Fonterra’s increased milk price forecast.  But sheep and beef farmers were also more upbeat with key markets holding up better than expected.  Horticulturalists were the exception with their confidence dropping in the face of severe labour shortages during a peak time for harvest.

Turning to own activity, the survey also showed a similar improvement in overall farmer confidence in their own business performance, although more horticulturalists expect their performance to worsen than improve.

ANZ Business Outlook

It was a different story for wider business confidence, with ANZ’s March Business Outlook Survey showing a downturn in expectations for both the general economy and own-activity.

Overall, a net 4.1% of businesses expect general economic conditions to worsen over the next 12 months, down 11.1 points from the February survey and down 4.1 points from the March survey’s preliminary result published earlier in the month.  Meanwhile a net 16.6% of businesses expect their own activity to increase over the next 12 months, down 4.7 points from the February survey and down 0.8 points from March’s preliminary result.

Investment intentions fell but employment intentions lifted.  Inflation pressures remain high.  There was relatively little change to expectations on profitability and exports, and credit conditions remain as tight as ever. 

Agricultural respondents remain the least optimistic of the sectors, although their results did improve from February’s survey.  A net 22.7% expect general economic conditions to worsen (up 15.4 points from a net -38.1%) and a net 9.1% expect their own activity to improve (up 9.1 points from a net 0.0%).  Higher dairy prices were cited as a likely influence for agriculture’s improvement.

Farm debt falls in February

Lending to agriculture dropped in February, according to the Reserve Bank’s latest Sector Lending Statistics.

In February 2021 agriculture lending was $62.34 billion, down $262 million (0.4%) compared to January and it was down $438 million (0.7%) compared to February 2020.  Dairy continued to bear the brunt of banks’ efforts to reduce their exposure to the sector.  In contrast lending to horticulture continued to be up strongly for the year.  This is shown as follows:

  • Dairy cattle farming: $38.60 billion, down $175 million for the month and down $1.44 billion for the year.
  • Sheep, beef cattle, and grains farming: $15.09 billion, down $28 million for the month but up $131 million for the year.
  • Horticulture: $5.67 billion, down $19 million for the month but up $574 million for the year.
  • Other agriculture on farm: $2.29 billion, down $38 million for the month and down $25 million for the year.

Although lending to agriculture was down for the year, lending to housing increased 9.0% with its growth accelerating over recent months in line with the booming housing market.  Business lending was down 4.1% and personal consumer lending down 12.9%.

Northland rules the roost

North Island regions outperformed those in the South Island, according to ASB’s December quarter Regional Economic Scorecard.

The top ranked region was (again) Northland, followed by Bay of Plenty, Gisborne, and Hawkes Bay. Northland performed particularly well for job growth and it was in the upper half for most other indicators, like retail sales, residential construction, and house sales.

The bottom ranked region was (again) Otago, followed by Marlborough, Southland, and Canterbury.  Otago has been hit particularly hard by the lack of international tourists with its retail sales among the weakest in the country and its jobs growth negative. 

The Regional Economic Scoreboard takes the latest quarterly regional statistics and ranks the economic performance of New Zealand’s 16 Regional Council areas. The fastest-growing regions gain the highest ratings, and a good performance by the national economy raises the ratings of all regions. Ratings are updated every three months, and are based on measures, including employment, construction, retail trade, house prices.

Employment static

The number of seasonally-adjusted jobs was flat in February compared to January, but they were down compared to February 2020 and there have been big changes in sectoral fortunes since COVID struck a year ago.

Statistics NZ’s monthly Employment Indicators showed that in February 2021 there were 2,207,736 filled jobs, down 4,617 (or 2.1%) compared to February 2020.  In seasonally-adjusted terms the number of filled jobs was virtually unchanged from January (up 245).

Compared to February 2020, there were large increases of filled jobs in health care and social assistance (up 4.8%) and construction (up 5.4%), but large declines for transport, postal, and warehousing (down 9.4%); administrative and support services (down 8.1%); and accommodation and food services (down 5.4%).

For agriculture, fishing, and forestry there were 104,655 filled jobs in February 2021, down 1,397 (or 1.3%) compared to February 2020.

House consents drop

In February 2021 3,129 new dwellings were consented, down 2.5% on February 2020, according to Statistics NZ’s monthly Building Consents Issued statistics.

The annual number of dwelling consents issued for the year-ended February 2021 was 39,725, up 4.9% on the year-ended February 2020.  The value of these residential consents was $14.73 billion, up 5.7%.

Statistics NZ noted that for the year-ended February 2021 7.8 new homes were consented per 1,000 residents.  This ratio has increased steadily since hitting a low of 3.0 in mid-2011 but is still well below a high of 13.4 in the year ended December 1973.

Turning to non-residential buildings, $599 million of consents were issued in February 2021, up 24.4% on February 2020.  However, despite the strong monthly increase, the annual total of $7.15 billion for the year-ended February 2021 was down 2.7%. 

The value of consents for farm buildings was $17 million in February 2021, down 22.4% on February 2020, while the annual value of $279 million for the year-ended February 2021 was down 0.2%.

NIWA Soil Moisture Data

NIWA’s latest soil moisture maps (as at 9am Wednesday 31 March) show it being significantly dryer than usual along the east coasts of both islands. Kaipara, East Cape, Hurunui, and eastern Southland are the areas where soils are most significantly dryer than usual.  After recent rain soil conditions are more ‘normal’ in the Bay of Islands, central Waikato, Taranaki, Whanganui, Tasman-Nelson, Marlborough Sounds, and the West Coast.

Exchange Rates

The NZ Dollar regained a bit of last week’s sharp drop, strengthening 0.5% against the TWI. It was up against all of our key trading partners, except the UK Pound. 

  NZ Dollar versusThis Week (31/3/21)Last Week (25/3/21)Last Month (26/2/21)Last Year (31/3/20)
US Dollar0.69890.69790.73490.5997
Australian Dollar0.91820.91790.93620.9740
Euro0.59610.59060.60450.5445
UK Pound0.50830.50950.52550.4862
Japanese Yen77.3475.9878.0765.09
Chinese Renminbi4.58984.55284.74034.2552
Trade Weighted Index73.9073.5376.1268.81

Source: Reserve Bank of NZ

Wholesale Interest Rates

Over the course of the week the yield for the 90 Day Bank Bill was unchanged, while the 10 year Government Bond yield rose 24 points, recovering almost all of last week’s drop. 

The Reserve Bank will next review monetary policy settings (including the OCR) on 14 April.

 This Week (31/3/21)Last Week (25/3/21)Last Month (26/2/21)Last Year (31/3/20)
OCR0.25%0.25%0.25%0.25%
90 Day Bank Bill0.35%0.35%0.31%0.49%
10 Year Government Bond1.78%1.54%2.02%1.06%

Source: Reserve Bank of NZ

Filed Under: Economy, Meat, National, Opinion, Politics

Primary Sidebar

Spotlight

Council candidates deserve searching questions

July 14, 2022 By Simon Edwards

More to see

Whisky in the jar at New Zealand’s Arable awards

Andrew wraps the week…

Government backflip on carbon farming baffling

Yili Group retains fifth position in Global Dairy Top 20

‘It’s just what you do’: 40th Anniversary of the IHC Calf & Rural Scheme

Positive results of retaining grass in critical source areas for Sheep Wintering Project

Farming for profit field day in Waitahuna

Tags

andrew hoggard animal welfare Arable awards beef Beef+Lamb bees biosecurity climate change competition consumer councils COVID-19 Covid-19 effects dairy DairyNZ dairy prices Damien O'Connor economics economy education emissions employment environment exchange rates exports free trade agreements government health and safety innovation meat on-farm on-farm safety OSPRI rates red meat safety science sustainability technology trade transport water wool worksafe

Footer

Federated Farmers is New Zealand’s leading independent rural advocacy organisation.

The federation’s aim is to add value to the business of farming for our members and encouraging sustainability through good management practice.

Recent

  • Government backflip on carbon farming baffling
  • Yili Group retains fifth position in Global Dairy Top 20
  • ‘It’s just what you do’: 40th Anniversary of the IHC Calf & Rural Scheme
  • Positive results of retaining grass in critical source areas for Sheep Wintering Project
  • Farming for profit field day in Waitahuna

Search

Tags

andrew hoggard animal welfare Arable awards beef Beef+Lamb bees biosecurity climate change competition consumer councils COVID-19 Covid-19 effects dairy DairyNZ dairy prices Damien O'Connor economics economy education emissions employment environment exchange rates exports free trade agreements government health and safety innovation meat on-farm on-farm safety OSPRI rates red meat safety science sustainability technology trade transport water wool worksafe

Federated Farmers of New Zealand