Rural Wrap: Buoyant but at risk
• Primary sector exports strong
• Many factors in play for what comes next
• Geopolitics and trade developments important
• El Nino a key risk this season
• Disease, inflation, and interest rates on the radar too
• Global growth and NZD provide reasonable backdrop
New Zealand’s primary exports have been buoyant over the past 18 months or so – with elevated pricing and decent volumes across many major products. Confidence in the agricultural sector is strongly positive.
This is quite remarkable in the context of global goings on especially given that assessing what comes next is fraught with difficulty due to a litany of uncertainties and risks that could materially and abruptly alter the outlook for better or worse. There are many items on the radar.
War ends, El Nino looms large
• War ends, oil prices unwind
• El Nino arrives lifting next season risks
• History warns of potential dent to NZ agriculture
• And risk of higher global food prices
Our previous Rural Wrap, written as conflict in the Middle East was ramping up, began with: “Let’s get this straight, based on current information the world is not going to end. Fuels are expensive and are getting more so. Supply is heavily restricted. But demand will fall and alternative supplies will rise. And then, one day, the Strait of Hormuz will reopen. The problem is that this takes time. So, in the interim it is imperative that farmers, businesses, households and governments alike prepare for the worst while hoping for the best knowing that no matter what, a significant adjustment process is under way.”
The ‘one day’ arrived in mid-June with a memorandum of understanding between the US and Iran, the Strait of Hormuz reopening, and oil prices tumbling. Crude oil prices have essentially fallen back to where they were before war broke out. Global fertiliser prices have also unwound from peaks, although the extent has varied by product and by source.