Bumper crop expected for China-bound apple export

Bumper crops were expected for avocados, apples and kiwifruit according to Rabobank's latest agribusiness outlook. Photo / File

Considerable change and uncertainty for New Zealand agriculture lies ahead this year with developments likely to have a significant impact on the sector's prospects in years to come.

Donald Trump's election as US president, environmental regulations continuing to tighten and September's general election were all highlighted in Rabobank's recently released New Zealand Agricultural Outlook 2017 report.

The industry would be keeping a close watch on global trade developments following Mr Trump's election and the resulting breakdown of the Trans Pacific Partnership (TPP) agreement, Rabobank Country Banking general manager Hayley Moynihan said.

''The breakdown . . . brings with it increased risk of an escalation to rising protectionism already evident through the last few years in many parts of the world, as well as increasing the importance of this year's trade negotiations with China - on an improved free-trade agreement - and with the United Kingdom and the European Union on FTAs,'' Ms Moynihan said in a statement.

Tightening environmental regulations, particularly in Waikato and Southland where significant plan changes were taking place, had the potential to increase costs and restrict intensification or change land use in 2017 and beyond.

Environmental regulation could also become an election issue, as could other topics relevant to the sector such as greenhouse gas liabilities and rules around foreign investment. Despite the uncertainty, the outlook for the year ahead was still positive for many of New Zealand's key agricultural sectors, particularly dairy and horticulture, she said.

In dairy, market fundamentals would further support farmgate prices in 2017, restoring profit margins and allowing dairy farmers to move on from two very difficult seasons.

A slower rate of growth in New Zealand milk production was expected to emerge in the 2017-18 season and beyond due to increasing environmental regulation, resource constraints and social pressures.

A large apple harvest is being predicted by Rabobank this year. Photo / Gregor Richardson

A further factor which would influence production levels was the investment appetite of dairy farmers and the size of that appetite would become much clearer at the start of next season when dairy farmers made a call on whether to invest profit in further expansion or prioritise debt repayment, she said.

Horticulture's outlook was also positive. Bumper crops were expected for avocados, apples and kiwifruit and demand from Asian markets for those products continues to rise.

The prospects for the wine sector were also strong, with the good prices achieved in 2016 likely to carry through.

Rabobank's latest agribusiness outlook said reduced domestic lamb supply would drive greater procurement pressures, but any notable farmgate or export price improvement would be largely determined by export demand and currency movements.

While Chinese demand was forecast to be strong following a few seasons of high inventory levels, as well as better market prices for certain cuts in the UK and the EU market, the strong New Zealand dollar was going to be the major headwind for greater returns during 2017.

Improvement in wool prices was unlikely through the first half of 2017. Production volumes would swell seasonally and crossbred stocks in China were reported to remain high, with buyers both selective and quiet.

China's demand for merino wool had been a different story. Imports from Australia and South Africa were up year-on-year. Prices continued to strengthen as a result, providing encouragement for New Zealand merino growers.

Record global beef production in 2017 would see weaker world beef prices translate into downward pressure on New Zealand cattle and export prices.