Opinion: Why New Zealand's rural sector is legendary

08 April 2021 / Published in Business

Ben Speedy is the General Manager of ASB Rural. Prior to joining ASB, Ben held various senior leadership roles in the banking and property data industries. Ben has a passion for agriculture, and helping rural New Zealand stay one step ahead.  

In New Zealand, rugby and the rural sector go hand in hand. While rugby is arguably New Zealand's national sport, you'd be hard pressed to find more die-hard rugby fans than in our regions. Rugby unites the nation in ways little else can.

But for the past 12 months, something else has united us: building health and economic resilience to the impacts of COVID-19. For a country like ours, reliant on exports, many predicted the pandemic would result in a broad slowdown in international trade, as border closures, logistics difficulties and reduced demand dampened the economic outlook.

But the worst predictions have, so far, proved unfounded and that's thanks, in large part, to the team of legends that make up New Zealand's primary industries.

While the vast majority of us experienced some form of lockdown, essential workers kept the economy turning. In New Zealand food production was regarded as an essential service so could continue to keep ticking over. And keep ticking over it did.

Local farm, orchard and vineyard owners and workers suited up and worked hard through the lockdown. As many continued to get up early and work late into the night, the picking seasons looked entirely different from years gone by. Not only did their efforts feed New Zealand, their produce fed the world.

Overall, 2020 turned out to be much better than originally forecast and there was a lot of great resilience and adaptability shown across the sector. In fact, according to Stats NZ figures, the rural sector contributed 5.1% to New Zealand's GDP in the 12 months to December 2020.

Specifically, the dairy sector has proven resilient, and thanks to strong demand for New Zealand product at the Global Dairy Trade auctions, ASB expects farmers to finish up with a farmgate milk price of $7.60 for the 2020/2021 season - a 40 cent lift on the season prior which is encouraging for the sector and New Zealand more broadly.

Similarly, forestry has performed well despite the disruption, with forestry prices ending 2020 up 0.5% on the end of 2019. New Zealand fruit has also benefitted from a renewed focus on healthy eating. 2020 saw a bumper kiwifruit crop in particular, with export values up 18% on 2020 at $2.7 billion.

Despite predictions of a sharp fall, resilient demand and output meant New Zealand goods exports finished the year flat on 2019.

Our data shows us that over the past 12 months regions that are more reliant on agriculture and exports have been experiencing the benefits. In fact, in the three months to December 2020 rural regions generally outperformed the major urban centres on ASB's Regional Economic Scoreboard, which tracks a range of economic indicators across the country.

Northland has been the strength of the local forestry sector, which has been one of the stars of the economy over the past year. Forestry exports are performing well thanks to the rapid recovery in China. During the same quarter, Bay of Plenty residents remain among the most confident in the country, helped largely by the fact the 2020 season was a record kiwifruit crop, while export activity for horticulture products proved robust.

Similarly, Waikato is a microcosm of the broader New Zealand story and has been performing well thanks to its large exposure to the dairy sector.

The economic outlook for New Zealand’s rural sector remains encouraging for the rest of 2021. Commodity prices are booming, which should benefit many, but there is likely to be some variance across the sector. Dairy and fruit prices are likely to stay elevated, but with many restaurants around the world still closed, it's difficult to say when the recovery will kick in for beef and lamb farmers. And, with the country's borders likely to remain closed to tourists for the foreseeable future an awful lot hinges on the pace of the COVID-19 vaccine rollout and the shape of the global recovery.

Yet, one constant remains: our legendary primary industries will continue to be there working hard to support New Zealand through and to you we say, thank you.


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