Agricultural sector looking to another profitable year

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Despite significant ongoing global turmoil, New Zealand agricultural producers are positioned for another profitable year in 2022, according to a just-released report by agribusiness banking specialist Rabobank.

The report says 2021 had seen record farmgate pricing locally for most New Zealand-produced agricultural commodities. The New Zealand agricultural sector had performed well in navigating erratic supply chains and with trade flows holding up well despite the global pandemic, while trade relations with China had remained strong.

Opportunities abound

New Zealand remains well positioned on global agricultural markets for the year ahead, the report says, with the production prospects for competitors remaining crimped, as South America, the west coast of the US and parts of Europe continue to deal with inclement weather conditions, reducing their ability to ramp up production in the face of high prices.

Constrained global production of key commodities will support firm demand and pricing for New Zealand products.

Risks ahead

The year ahead will also, however, bring elevated risks for the country’s agricultural sector, the report says, with Covid and the Chinese economy in particular continuing to loom large, while spiralling inflation and ongoing supply chain issues will provide their own challenges.

Freight challenges and mounting inflationary pressure through the supply chain will also both continue to “cause headaches” in 2022.

More change and uncertainty

More uncertainty is also expected in 2022 as regulatory frameworks continue to develop in the area of environmental sustainability, the Rabobank Outlook says. Key milestones will include a decision on an emissions-pricing mechanism for agriculture and the release of the Government Emissions Budget.

Commodity outlook for 2022

Dairy: Global supply shortages will underpin firm commodity prices, but inflationary cost pressure will take away some of the record price shine.

Beef: Rabobank expects farm-gate beef pricing to remain elevated above the five-year average in 2022, supported by constrained global beef supply and strong demand from China and the US.

Sheepmeat: Steady demand from China in particular will likely support elevated farm-gate pricing over the coming year, despite an expected lift in global availability of sheepmeat.

Venison: The venison market is expected to continue to recover in 2022, with the re-opening of food service in Europe and the US. Rabobank anticipates farm-gate pricing to remain subdued in 2021/22, but strengthen into 2022/23.

Horticulture: Orchard-gate returns for kiwifruit are expected to remain elevated in 2022, off the back of strong consumer demand. Significant changes to licence areas and the tender process will be made in 2022.

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