2 Dec 2008

International demand for NZ farm goods 'likely to fall'

3:29 pm on 2 December 2008

The Ministry of Agriculture and Forestry is predicting reduced demand for New Zealand's primary exports as a result of the global economic slowdown.

The ministry's briefing for incoming ministers in the new Government said demand from oil-producing nations and emerging Asian economies for dairy products is likely to fall.

Those nations take about 40% of New Zealand dairy exports.

It said demand for New Zealand lamb, regarded as a premium meat product, is also likely to fall as consumers turn to cheaper substitutes.

On the other hand, demand for beef is expected to remain strong as consumers switch to lower-cost ground beef.

The briefing paper said the international slowdown in housing activity will affect wood panel and sawn timber exports and keep wool prices low, as new housing is the biggest market for wool carpets.

In the horticulture sector, the ministry predicts that New Zealand kiwifruit, which sells at a premium 40% to 100% above other kiwifruit, faces a potential threat from cheaper fruit, as do pipfruit exports.

The same trend is likely to dampen wine prices at a time when New Zealand production is hitting record levels.

The Ministry of Agriculture and Forestry warns that horticultural exporters who typically rely heavily on seasonal finance will also be hit by the increasing cost of credit.