14 Jun 2011

Primary product prices forecast to hold

1:02 pm on 14 June 2011

The Ministry of Agriculture & Forestry says dairy, meat and wool prices should remain at their current high levels over the next few years, as production increases and the New Zealand dollar depreciates.

The forecast is part of the ministry's latest situation and outlook report, which looks at issues facing the primary sectors as well as trends over the next five years.

The report says short-term supply disruptions, like droughts and floods, have significantly pushed up world agricultural prices.

But it says prices will stay high in the medium-term because of increased production, demand from emerging Asian markets and the economic recovery of developed nations.

Deputy director-general Paul Stocks says MAF is forecasting strong growth in export revenues.

But this hinges on the exchange rate. Mr Stocks says meat and wool farmers in particular should not bank on continuing high prices.

He says farmers should continue to repay debt and concentrate on their day to day cash-flow.

Horticulture sector lagging

Elsewhere in the report, MAF says that the horticulture sector is lagging behind the rest of the primary sectors, because of the PSA vine disease in kiwifruit, and the oversupply of grapes and wine.

It says returns to kiwifruit and apple growers are expected to be stable this season, while wine export prices will be lower.

Production of kiwifruit and wine is forecast to rise gradually over the next few years.

The report also says that prices for forestry products will lift further as result of strong global demand.