6 Aug 2008

Rising costs expected to negate higher farms returns

6:31 am on 6 August 2008

Federated Farmers says producers will get little benefit from higher prices and export returns forecast by the Ministry of Agriculture & Forestry, because they will be eaten by rising on-farm costs.

MAF's annual Situation & Outlook report predicts a lift in prices and export earnings for all the main primary sectors over the next five years.

It also identifies a continued depreciation of the New Zealand dollar as a common factor in improving those export returns.

The SONZAF report predicts that dairy export earnings will ease after peaking next year, but then recover to almost $12 billion by 2012.

It forecasts a 30% rise for manufacturing beef prices in that five year period.

It says sheep farmers will see a 25% lift in lamb export earnings, despite falling stock numbers, and a 40% lift in the average wool sale price, to $5.35 per kg.

In the forestry sector, log and pulp prices are projected to climb by more than 30%.

In the horticulture sector, the value of wine exports is forecast to rise by 76% to $1.3 billion.

The average kiwifruit price will rise from the current $8 a tray to more than $10 by 2012, lifting export returns to more than $1 billion by 2012.

Federated Farmers President Don Nicolson says the gains from a more favourable exchange rate will be short lived. He says any recent gains have been well and truly gobbled by rising costs.