Agritech exports boom on China demand

Agritech sector exports rocketed 28 per cent to more than half a billion dollars in 2004 according to a new report, but some are warning companies to make hay while the sun shines.

The National Bank report shows agritech exports in 2004 were $577.8 million up from $451 million in 2003, with China the main driver at $120.3 million, up from $47.2 million.

David Powell, sector manager biotech and agritech for New Zealand Trade and Enterprise, says local companies must capitalise now on the demand from China.

"The spike is really not sustainable long term because sooner or later the door will be open to North American genetics."

The banning by China of live animal imports from the US, Canada and the European Union because of bovine spongiform encephalopathy, so called mad-cow disease, lay behind the bumper year for local agritech live animal exporters.

"Leaving really the only markets they were able to access them from Australia and New Zealand ... and it's been big business," Powell said.

To help sustain and develop New Zealand's presence in China, Trade and Enterprise set up a special agritech project last July.

"The best thing we can do now is get the rest of the New Zealand dairying technology in and make it the accepted practice in China."

Powell says the project aims to build links between local companies and the Chinese agricultural sector in areas including pasture seed, live cattle, animal genetics, fencing systems, milking machinery, electronic identification and management software. "The key thing has been that we need to future-proof the agritech industry as a whole in the interim ... and just ensure we stay in there even when the blip goes down."

John Bolsover, report author and National Bank economist, says the total revenue generated by agritech both domestically and internationally is estimated to be $3 billion. Bolsover says the agritech performance reflects agriculture's growing economic importance since 1990, contrary to expectations at that time of a declining dependence on the sector.

He says in 1990-91 the agricultural sector, including associated activities, contributed 13.5 per cent to GDP. By 2002-03, this had grown to 17 per cent.

Good growing conditions, reasonable commodity prices and a weak New Zealand dollar boosted agricultural performance in 2000.

However, the New Zealand dollar, described by Bolsover as a commodity currency, has since seen its value rise above the US70 cent mark.

He says the rise in commodity prices has both helped strengthen the dollar and at the same time insulate the agricultural sector from its effects.

But he added the 70 cents mark was the "pain threshold" for many sectors including forestry, seafood and parts of manufacturing.