by Nick Clark, Federated Farmers Manager General Policy
Imports on the rise
Despite a fall in petroleum imports, overall imports rose sharply to the highest ever for a March month while exports continued to slip.
Statistics NZ’s Overseas Merchandise Trade statistics showed goods imports worth $5.65 billion in March 2021, up 11.0% compared to March 2020. There was strong growth for all the major import commodities, except petroleum which dropped 49.4%. The leap in imports came after 10 declines out of the previous 11 months (measured as monthly tallies lower than the same month of the previous year).
Meanwhile, goods exports were worth $5.68 billion in March 2021, down 2.3% on March 2020. This was the seventh month in a row where monthly exports were down on the same month the year before. Movements for key commodities follow:
- Milk powder, butter, and cheese up 3.9% to $1.55 billion.
- Meat and edible offal down 7.3% to $927 million.
- Logs, wood, and wood articles up 49.2% to $512 million.
- Fruit down 3.5% to $316 million.
- Preparations of milk, cereals, flour, and starch (largely infant formula) down 32.6% to $180 million.
- Wine down 20.4% to $152 million.
In addition, exports of eggs, honey, and other edible animal products were up 6.4% to $47 million; live animals down 45.1% to $26 million; and wool down 14.6% to $38 million.
The net result was a monthly goods trade surplus of $33 million, which was down from a $726 million surplus for March 2020. Trade surpluses are typical in March months.
For the year ended March 2021, goods exports were worth $58.94 billion, down 2.8% compared to the year ended March 2020. Looking at the key export commodities:
- Milk powder, butter, and cheese down 4.1% to $15.50 billion.
- Meat and edible offal down 4.9% to $7.90 billion.
- Logs, wood, and wood articles up 2.1% to $4.78 billion.
- Fruit up 11.9% to $3.94 billion.
- Preparations of milk, cereals, flour, and starch down 1.2% to $2.34 billion.
- Wine up 1.7% to $1.95 billion.
In addition, exports of eggs, honey, and other edible animal products were up 35.1% to $545 million; live animals up 32.9% to $431 million; but wool was down 30.7% to $357 million.
Goods imports for the year ended March 2021 were worth $57.26 billion, down 10.6% compared to the year ended March 2020. The biggest drop was for petroleum products, down 48.6% – of put another way down a whopping $3.64 billion.
On an annual basis, the net result was a goods trade surplus of $1.69 billion. This was down from $2.36 billion for the year ended February 2021, but it is still quite a turnaround from the $3.38 billion deficit for the ended March 2020.
China continues to dominate trade and increasingly so. Exports to China were up very strongly in March 2021 (up 29.7% compared to March 2020), while in contrast exports to most other countries fell. March’s exports to China ($1.95 billion) were almost three times the amount sent to the next biggest export market, Australia ($633 million). Imports were a similar story with Chinese imports up a whopping 87.4% compared to March 2020.
Farm sales up – are the banks back?
Farm sales continue to be strong, according to the Real Estate Institute of NZ’s monthly Rural Market Statistics.
There were 390 farm sales in the three months ended March 2021, up 40.8% on the same period last year, although down a bit on the three months to February 2021.
A total of 1,549 farms were sold in the year to March 2021, up 27.3% on the previous year. Dairy farms were up 123.7%, grazing farms up 51.9%, and finishing farms up 41.4%. However, arable farms were down 41.2% and dairy support down 8.7%.
The median price per hectare for all farms sold in the three months to March 2021 was $25,665, up 13.3% on the same period last year. The REINZ All Farm Price Index, which adjusts for differences in farm size, location, and farming type, was up 5.9% compared to the same period last year.
REINZ made an interesting observation “…all the trading banks are now more active within the rural sector than has been the case in recent years, this being a significant factor relating to sales activity within the rural property market”.
Banking Survey coming
Speaking of banks, Federated Farmers members should keep an eye on their email inboxes next week for an invitation to complete the May 2021 Banking Survey. The six-monthly survey provides us with invaluable insights into farmers’ banking relationships and issues of concern. One lucky respondent will win a $500 grocery card, so be in to win!
Confidence bounces back
After falling at the start of April, business confidence recovered later in the month, according to ANZ’s monthly Business Outlook Survey.
Overall, a net 2.0% of respondents expect general economic conditions to worsen over the next 12 months, a 6.4 point improvement on April’s preliminary result and up 2.1 point improvement from March. Agricultural respondents had a huge turnaround in sentiment compared to March – 33.2 point surge to a net 10.5% expecting conditions to improve. It went from the most pessimistic sector to the most optimistic in just one month. High commodity prices will be the key reason.
Meanwhile, a net 22.2% of respondents expect their own activity to increase over the next 12 months, up 5.8 points on the preliminary result and up 5.6 points from March. Agriculture again had a big improvement – up 17.2 points – to a net 26.3% expecting improvement. Construction remained the most optimistic sector for own activity.
Compared to the preliminary April results, all activity indicators were higher. ANZ noted that inflationary pressures are not receding, with pricing intentions and cost expectations both on the rise.
Although agricultural respondents were more upbeat, their expectations for investment, employment, and profits were all down compared to March.
Next week
The big economic news for next week will be Stats NZ’s Labour Market Statistics. This includes the ‘official’ quarterly rate of unemployment as measured by the Household Labour Force Survey and is a key indicator for the Reserve Bank when considering its employment objective. Unemployment was only 4.9% in the December 2020 quarter. If the rate falls it will confirm the tightness of the labour market but if it rises it will be another indicator that the economy has lost momentum. The HLFS has been very noisy over the past year so it’s anyone’s guess where the rate of unemployment will land.
NIWA Soil Moisture Data
NIWA’s latest soil moisture maps (as at 9am Thursday 29 April) show soils continuing to be significantly drier than usual across almost all of the east coasts of both islands, especially in East Cape, Hawkes Bay, Hurunui, Clutha, and Southland. In contrast, soils are significantly wetter than usual in western Taranaki, and Tasman Bay to Marlborough Sounds.
Exchange Rates
The NZ Dollar was largely unchanged, down just 0.1% against the TWI. It was a little weaker against the US Dollar, the Euro, and the Renminbi and a little stronger against the Australian Dollar, the Pound, and the Yen.
Source: Reserve Bank of NZ
Wholesale Interest Rates
Over the course of the week the yield for the 90 Day Bank Bill was unchanged, but the 10 year Government Bond yield was up 3 points.
The Reserve Bank will next review monetary policy settings (including the OCR) on 26 May.
| This Week (29/4/21) | Last Week (22/4/21) | Last Month (29/3/21) | Last Year (29/4/20) | |
| OCR | 0.25% | 0.25% | 0.25% | 0.25% |
| 90 Day Bank Bill | 0.35% | 0.35% | 0.34% | 0.26% |
| 10 Year Government Bond | 1.61% | 1.58% | 1.67% | 0.70% |
Source: Reserve Bank of NZ