NZ agricultural sector poised for a profitable 2021 amid global turbulence - report

File photo / Duncan Brown

New Zealand agricultural producers are poised to enjoy a fifth consecutive year of general profitability in 2021, despite significant global turbulence.

Most agricultural sectors can expect to see average to above-average pricing, manageable cost inflation and production holding up well, according to Rabobank's annual report, Agribusiness Outlook 2021.

This was even though the outlook for 2021 was "bristling with risk", with bumps anticipated throughout the coming months, the report said.

As 2021 gets underway, the "world remains a turbulent place" for New Zealand's agricultural sector, report co-author, Rabobank senior dairy analyst Emma Higgins said.

"The Covid-19 pandemic continues to rage in many regions around the globe, the finer points of the messy Britain and the EU divorce are now in full swing, and tensions in the US remain high following an acrimonious transfer of power to the new Biden administration," Higgins said in a statement.

"More frequent use of market intervention is a further factor creating global instability, as
are ongoing trade wars which have distorted the direction and price of traded goods."

While New Zealand agriculture had been unable to completely avoid the discomfort caused by this turbulence, the sector had "done much right to keep itself on a
strong path," Higgins said.

Rabobank senior dairy analyst Emma Higgins. Photo / Supplied

Listen to Jamie Mackay interview Emma Higgins about the Agribusiness Outlook 2021 report on The Country below:

Commodity outlook for 2021

Dairy:

Rabobank expected limited supply growth in competing regions, along with firm Chinese buying, to bring, not only a fifth consecutive profitable season for dairy farmers in 2020/21, but probably supportive pricing for early 2021/22.

Beef:

Farmgate prices were expected to remain marginally below the five-year average through most of 2021 due to continuing food service restrictions, strong competition from South America, and a high New Zealand dollar.

Sheep:

Weak foodservice and incomes in the EU and US would also impact demand for higher-value lamb cuts, pushing export returns below 2019/20 levels - but Chinese demand would help provide a healthy floor.

Wine:

2021 was expected to bring significant challenges in each of New Zealand's three largest markets – the US, the EU and Australia. But those focused on retail channels are still well placed.

Horticulture:

Demand for quality and safe horticultural produce will remain strong. Covid disruptions to labour supply may take the shine off this opportunity, while navigation of geopolitical tensions will be key.

Regulation:

The agricultural sector will be hoping for greater clarity around how aspects of the freshwater reforms will be implemented in the future. But action is required, despite the uncertainty.