Farm sales down but prices holding
There were 403 farm sales in the three months ended May 2022, according to the Real Estate Institute of New Zealand’s Rural Market Statistics. This was down 11.0% compared to the three months ended April 2022 and down 10.4% on the three months ended May 2021.
For the full year to May 2022 1,697 farms were sold, down 7.1% on the year to May 2021. Dairy farm sales were up 11.9%, but the other property types were all down – dairy support down 33.6%, grazing farms down 12.9%, finishing farms down 4.1% and arable farms down 15.2%.
The median price per hectare for all farms sold in the three months to May 2022 was $29,760, up 3.9% compared to the three months to April 2022 and up 5.6% on the three months ended May 2021. The REINZ All Farm Price Index, which adjusts for differences in farm size, location, and farming type, increased 1.0% in the three months to May 2022 compared to the three months to April 2022 and was up 31.4% compared to the three months to May 2021.
GDT down again
Dairy prices went back into retreat at this week’s Global Dairy Trade auction.
The GDT Price Index fell 1.3%, reversing most of the previous auction’s 1.5% gain a fortnight ago.
There were price rises for skim milk powder (up 1.0%) and butter (up 2.4%) but these were outweighed by declines for whole milk powder (down 0.6%), anhydrous milk fat (down 4.7%), and cheddar (down 9.0%).
The average selling price was $US4,600 and 20,760 tonnes of product were sold.
The GDT Price Index has lost 15.8% since hitting its peak on 1 March. However, it is still 6.6% higher than at the same time last year.
A wake-up call but is anyone listening?
The World Economic Forum’s annual Global Competitiveness Ranking is out and it has shown a slump in New Zealand’s placing from 20th to 31st. New Zealand’s 11 point fall was the biggest of the 63 countries included. Australia’s ranking improved from 22nd to 19th.
The World Competitiveness Ranking divides the national environment into four main factors: economic performance, government efficiency, business efficiency, and infrastructure. Each of the four factors is broken into five sub-factors.
New Zealand’s rankings fell for all four main factors. Economic performance fell 15 points to 47th, government efficiency fell 6 points to 17th, business efficiency fell 14 points to 36th, and infrastructure fell 4 points to 29th. There were particularly poor rankings for sub-factors of international trade (54th), international investment (45th), productivity and efficiency (48th), labour market (46th),and technological infrastructure (46th).
New Zealand’s major challenges were seen as:
- Labour shortages across almost all sectors of the economy.
- Low productivity and resultant lack of competitiveness on wages.
- High house prices and stubborn inequality.
- Short term policy thinking, short term societal (non-political) thinking.
- Slow transition of habits (consumption) and industry (investment) to low carbon economy.
Such a steep drop in this global indicator should be a wake-up call for New Zealand. Yet there seems little appetite for action that would improve competitiveness and productivity.
Another wake-up call?
The Westpac McDermott Miller Consumer Confidence Survey slumped in the June quarter, down 13.4 points to 78.7. A score below 100 indicates more pessimists than optimists.
Since the survey began in 1988 the average score has been 110.2. A score this low has been recorded only twice previously – first during the recession in the early-1990s, and second during the Global Financial Crisis in 2008/09.
The drop in confidence was felt across all age groups, income brackets and regions. Westpac noted that weak consumer confidence is weighing on household spending appetites, reinforcing its expectations for a slowdown in economic growth.
Imports and exports on the up, trade deficit rockets
May saw a further big increase for goods exports and but an even bigger increase for imports, according to Statistics NZ’s monthly Overseas Merchandise Trade statistics.
Goods exports were worth $6.95 billion in May 2022, up 18.1% compared to May 2021, with meat and edible offal up 27.0% to $1.00 billion; fruit up 23.1% to $779 million; and milk powder, butter, and cheese up 10.6% to $1.64 billion.
Interestingly, monthly exports rose for all our top export partners except China, where exports were down $69 million. The decline was driven by a $208 million fall in exports of milk powder, butter, and cheese to China. Imports from China continued to rise strongly though.
Goods imports continued their even stronger growth, up 24.1% to $6.69 billion. Fertiliser had by far the biggest percentage increase, surging 355%. Cereal imports jumped 192%; other chemical products leapt 105%; food residues, wastes, and fodder rose 39%; and petroleum and products also rose 39%. Higher prices will have driven many of these huge increases in import values. They will likely flow through to businesses, including farms, and consumers.
The goods trade balance in May 2022 was a surplus of $263 million, down from the $497 million surplus in May 2021. Surpluses are typical in April months.
On an annual basis, for the year to May 2022, goods exports were $67.19 billion, up 12.9% on the previous year. For the key primary sector export commodities:
- Milk powder, butter, and cheese: up 19.1% to $18.27 billion.
- Meat and edible offal: up 19.1% to $9.41 billion.
- Logs, wood, and wood articles: up 2.5% to $5.38 billion.
- Fruit: up 8.1% to $4.04 billion.
- Preparations of milk, cereals, flour, and starch: down 10.6% to $2.02 billion.
- Wine: up 1.8% to $1.92 billion.
- Casein and caseinates: up 36.8% to $1.45 billion.
In addition, live animal exports were up 1.3% to $512 million and wool up 14.4% to $442 million. However, exports of eggs, honey, and other animal products were down 3.5% to $499 million and vegetables down 5.4% to $441 million.
Annual growth in goods imports was huge, up 28.8% to $76.71 billion. There were particularly big increases for other chemical products (up 88%); fertilisers (up 79%); pharmaceutical products (up 63%); iron and steel articles (up 58%); petroleum and products (up 47%); and vehicles, parts, and accessories (up 36%).
The annual goods trade balance for the year to May 2022 was a huge deficit of $9.52 billion, a massive increase from a $49 million deficit for the previous year.
Activity increases
Manufacturing and services both recorded stronger expansion in May, according to the BNZ-BusinessNZ Performance of Manufacturing Index (PMI) and Performance of Services Index (PSI).
The May 2022 PMI was 52.9, up 1.7 points from April. A PMI score of over 50 indicates expansion and a score below 50 indicates contraction, so this is stronger expansion. Although an encouraging overall result and good that sub-indexes for Production (52.8) and Delivery of Raw Materials (55.4) both returned to expansion, New Orders (53.0) recorded its lowest level of activity since last August’s lockdown. Negative comments from manufacturing respondents were also high at 72.7%, up from April’s 70.3%.
Meanwhile, the PSI came in at 55.2, up 3.0 points from April, and its highest score since June 2021. New Orders/Business (62.0) and Activity/Sales (59.6) both experienced pick-ups in activity. But it was not all positive. Supplier Deliveries (45.0) recovered from earlier lows but remains negative while Employment (48.5) dipped back into contraction. Meanwhile, the percentage of negative comments from services respondents was unchanged on 61.9%.
NIWA Soil Moisture Data.
NIWA’s latest soil moisture maps (as at 9am Wednesday 22 June) show a similar picture to last week. Most areas have soil conditions about average for this time of year, although significantly wetter than usual in Hawkes Bay, Marlborough, and North Canterbury and significantly drier than usual in Matamata-Piako, coastal Canterbury south of the Waimakariri, and coastal Otago.
Exchange Rates
The NZ Dollar was unchanged for the week against the Trade Weighted Index. It was down against all our major trading partners except the Australian Dollar and the Japanese Yen.
Wholesale Interest Rates
Over the course of the week, the yield for the 90 Day Bank Bill was up 2 points to 2.78% while the 10 year Government Bond yield was down 14 points to 4.02%.
The Reserve Bank will next review monetary policy settings (including the OCR) on 13 July.
| This Week (23/6/22) | Last Week (16/6/22) | Last Month (23/5/22) | Last Year (23/6/21) | |
| OCR | 2.00% | 2.00% | 1.50% | 0.25% |
| 90 Day Bank Bill | 2.78% | 2.76% | 2.28% | 0.34% |
| 10 Year Government Bond | 4.02% | 4.16% | 3.50% | 1.82% |