Difficult road ahead
| We are currently in the eye of the Covid-19 storm. In New Zealand life is returning to normal as lockdown conditions ease much faster than was originally deemed feasible. While the end of the disruption is very welcome, the real economic damage this pandemic is causing is only beginning to become evident. In other parts of the world the health impact of the disease has been far more severe than here, and the economies of virtually every country in the world have been significantly impacted by this disease. New Zealand’s exports are highly dependent on economic conditions in the markets in which we sell our produce. Although the whole world is affected, diversification of markets is nonetheless valuable. People have to eat, and our increased exposure to developing markets is a blessing in the current situation as food demand in these economies may prove more resilient than the developed economies where a large portion of the food spend is more discretionary. Global dairy commodity prices have held up exceptionally well so far, but a further weakening in pricing is anticipated, which will put downward pressure on the farmgate milk price. Meat export prices have generally softened despite global supply disruption, with the more expensive, restaurant-oriented cuts unsurprisingly suffering the most. The horticulture and arable sectors have done an outstanding job, as the level 4 lockdown coincided with the harvest of fruit and grain. Kiwifruit is benefiting from global consumers focusing on healthy products, while the fortunes of wine producers vary depending on their typical sales channel. Land sales remain subdued, although the recently released freshwater policy may spur some more sales activity. There has also been a lift in firms looking to invest in the primary sector now that returns from many other sectors are subdued. This has the potential to kick the property market into gear again, although the dearth of sales would indicate that land values have not yet bottomed out. –ANZ Research |
