Rabobank says 2017 will be a period of considerable change and uncertainty for New Zealand agriculture. Developments likely to have significant impact on the sector’s prospects for years to come

Rabobank says 2017 will be a period of considerable change and uncertainty for New Zealand agriculture. Developments likely to have significant impact on the sector’s prospects for years to come

Content supplied by Rabobank

New Zealand agriculture faces a “moment of truth” in 2017, according to a report by agribusiness banking specialist Rabobank.

In its recently-released New Zealand Agricultural Outlook 2017 report, Rabobank says as an industry traditionally characterised by a liberal operating environment, and a key beneficiary of several decades of global shift to freer trade, agriculture faces a period of heightened regulatory uncertainty and change on both fronts.

Releasing the report, Rabobank Country Banking general manager Hayley Moynihan said 2017 was ushering in a period of considerable change and uncertainty for New Zealand agriculture with developments throughout the year likely to have a significant impact on the sector’s prospects this year and in the years to come.

“The industry will be keeping a close watch on global trade developments in 2017 following Donald Trump’s election in the US and the resulting breakdown of the Trans Pacific Partnership (TPP) agreement,’ she said.

“The breakdown of this agreement 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 (FTA) – and with the United Kingdom and the European Union on FTAs,” she said.

Ms Moynihan said New Zealand’s tightening environmental regulations and the 2017 general election could also have a major impact on the outlook for the sector. “Tightening environmental regulations, particularly in the Waikato and in Southland where significant plan changes are taking place, have the potential to increase costs and restrict intensification or change land use in 2017 and beyond,” she says.

“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. Policy relating to these areas may be subject to change, especially if a coalition government including Labour, NZ First and the Green party were to be voted in.”

Ms Moynihan said the agricultural sector has the opportunity to influence in some form each of these factors and industry groups would be lobbying hard to achieve favourable outcomes.

“The importance to the New Zealand agricultural sector of the coming year should not be underestimated. How the industry navigates through this period will fundamentally shape its prospects in the years to come,” she said.

Despite the uncertainty, the report says the outlook in 2017 is still positive for many of New Zealand’s key agricultural sectors.

“In the dairy sector, market fundamentals will further support farmgate milk prices in 2017 restoring profit margins and allowing dairy farmers to move on from two very difficult seasons,” Ms Moynihan said. “We expect to see a slower rate of growth in New Zealand milk production emerge in the 2017-18 season and beyond due to increasing environmental regulation, resource constraints and social pressures. A further factor which will influence production levels is the investment appetite of dairy farmers, and the size of this appetite will become much clearer at the start of next season when dairy farmers make a call on whether to invest profit in further expansion or prioritise debt repayment.”

The report says the outlook for New Zealand’s key horticultural sectors in 2017 is also positive.

“Another strong year of production and export growth is expected for New Zealand’s leading horticulture sectors with bumper crops expected for avocadoes, apples and kiwifruit and demand from Asian markets for these products continuing to rise,” Ms Moynihan said.

The prospects for the wine sector were also strong, the reports says, with the good prices achieved in 2016 likely to carry through to 2017. “At this early stage of the season, grape production is tracking around average levels and with wine company inventory still ample for the current demand trajectory, wine grape pricing is expected to hold steady in the coming year.”

Sheep and beef producers can expect a more challenging 2017, according to the report, with beef and sheepmeat price improvement looking unlikely over the next 12 months. “Record global beef production will see downward pressure on New Zealand cattle prices while the strong New Zealand dollar is the major headwind for greater sheepmeat returns during 2017,” Ms Moynihan said.

“Industry participants will be keeping a close eye on the impact of recent corporate changes in the animal proteins sector with most hoping these changes will bring on-going benefits to suppliers through plant rationalization and improved access to China.”

PDF iconMedia Release - Moment of truth for NZ Agriculture - Industry report (1).pdf

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10 Comments

I think regulations are going too far, and are discriminatory. What price for your clean river? Destroying the grass fed animal industries. If we were really interested in the environmnet we would be regulating against importing goods from countries like China who generate power by burning coal. It's got nothing to do with the environment, it's more to do with trying to convert NZ into a rich persons paradise. It's elitism.
https://www.google.co.nz/search?q=chinese+pollution&hl=en&biw=1239&bih=5...
Take a look at these images and think about how much of this pollution we are responsible for.

It's an inability to identify the problem, isolate the offenders and deal with it ,that is leading to blanket legislation and and ineffectual responses from pro farming or should I say, pro large scale corporate farming by Regional councils.

The backlash is getting scary and it's hard to have a decent debate with someone from town without a lot of emotion and ignorance getting dragged in.

http://www.stuff.co.nz/environment/88605503/over-the-line-rivers-being-w...

Yes.

Had an idea the other day, when discussion turned to 'how to' quantify who the offenders are - and then 'prove it', with evidence that is rock solid in terms of prosecution. All this presently is really costly. So I thought about the following, and wonder if this sounds feasible/fair/possible etc. to you, Andrew?

Saves us arguing the science of water quality/water testing etc for the purposes of prosecutions. Here's the idea - keen to hear your thoughts:

Can we reasonably accurately quantify N pollutants, for example, based on animal mass? If so, we then fly a GPS programmed, thermal imaging drone over all rural landholdings, say twice yearly, It auto calculates the mass of all animals resident on the landholding (regardless of species because mass is what is measured), then a program auto calculates the N factor for the landholding and fines get issued where N is exceeded for that particular landholding. Fines could be wiped provided proof of sale of the requisite number of animals is provided within a certain time frame.

Fishhooks? Worthwhile? etc.

I will run it by a friend of mine, farmers in general are getting very 'gun shy' when it comes to new regulations. We used to run a lot of cattle on crops in the winter, meant we could get our spring cattle in the fall and still look after our big cattle. In a wet year it was a mess but in a dry winter it worked well.
Today under what is proposed I won't have that option, although we stopped it as it wasn't that economic 10 years ago.

We have these systems for cattle called techno systems and they use a bit of N and get some soil damage, I suspect they are unsustainable and some by the main road certainly don't show us as an industry, in good light. The object is to carry twice as many cattle, screw them down in winter in managed starvation and then utilise spring growth, I think most have reduced stocking today as cattle are too expensive to treat like that. The fact farmers ever thought it was ok to treat animals that way in the first place is a worry. I'm afraid we are all a bunch of individuals with varying beliefs regards the right way to treat animals.

I have farming friends and they go nuts every time they drive past a techno system in winter, she even rings the Spca. I also think the practice where animals have no shade or shelter, no water during the day in summer as the pipes on the surface and water is hot, unacceptable. On the other hand I have friends who have modified systems which work better. Others are very focused on the overdraft and do whatever needs to be done to feed the banker.

These intensive systems are pushed by beef and lamb and MPI the farmers get awards etc. Being honest I think we are in for a change as profits fall in high cost systems, many of the problems will go away as returns fall and cost cutting is priority. Most of these systems use bull calves from the dairy industry, the USA is full of beef with kills way above last year and Brazil is on the scene with its massive beef herd, Brazil has a lot of trimmings as they traditionally eat prime cuts and the CL beef is discounted. Brazil and India with massive beef herds becoming focused on exports and the rise of Russia will change our game whether we like it or not.
Sorry got a bit off topic there.

Thanks! I assume this comment, "Today under what is proposed I won't have that option, although we stopped it as it wasn't that economic 10 years ago" - means nitrogen limits proposed? I assume the 'how to' calculate that is a somewhat convoluted formula? Or is there some other metric that would prevent this?

Always good to read about the issues - we really, really do as a nation need to make ag economic again. These days it isn't simply a matter of land prices - as I'm talking to farmers with low debt that are similarly despondent. Local government taxes are always a problem - one of the high costs that regulators should be able to bring down if they work smarter.

Kate, I think a good example is Horizons failure to enforce their own plan change, letting large intensive operations continue to degrade the environment, doesn't give much confidence in a regulatory solution.

Biggest problem I see with your idea is soil variability. Add to that topography and then differences in aquifer, the list becomes almost endless and endlessly complex.

Kate, In dairy farming prosecutions, science arguments very rarely occur as the RMA only requires that a breach May result in contamination - it doesn't actually have to be proven any contamination occurred.

I support redcows comment - there are many more variables than just cow numbers - despite what you may read. Dairy farmers have consents that limit the number of cows on a property. Some regional councils are more dedicated to checking consent conditions than others. ;-)

To get an understanding of the complexities water quality/values you may find this 2013 abstract interesting to read 'RIVER WATER QUALITY IN NEW ZEALAND: AN INTRODUCTION AND
OVERVIEW

https://www.landcareresearch.co.nz/__data/assets/pdf_file/0009/77058/2_1...

Regional councils are money hungry.

I'm starting to doubt MPI

This email is to provide you with information regarding the MPI detection of dead Brown Marmorated Stink Bug (BMSB) at the border in a 2nd hand grape harvester imported from Italy on February 3. This is the first time BMSB have been detected in agricultural machinery directly linked to the wine industry. The BMSB were detected by an MPI visual inspection. The BMSB were dead because the harvester had been fumigated prior to arrival. The fumigation was a voluntary measure and is not a biosecurity requirement.

This find highlights the heightened risk for the potential arrival of BMSB in consignments of agricultural/winemaking machinery from Italy. The timeframe for the period of heightened risk extends until April 30, 2017.

What is Brown Marmorated Stink Bug (BMSB)?

BMSB is the wine industrys most unwanted pest
BMSB is not currently established in New Zealand
BMSB feeds on more than 300 hosts, including grapes and a wide range of other horticultural plants.
Adults generally feed on mature and immature fruit, while nymphs (young insects) feed on leaves and stems as well as fruit.
When disturbed or crushed BMSB emits a powerful unpleasant odour that can taint juice and may taint wine rendering it unmarketable.
What does BMSB look like?

Adults are approximately 1.7cm long with a distinctive brown shield shape. Underside is white/tan, legs and antennae are brown with white banding.

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