According to Rabobank’s NZ Agribusiness Outlook 2023 the agriculture sector is in for another tough year with the re-opening of China, global and domestic inflation policy, market signals for low or zero emission products and the upcoming NZ election campaign highlighted as four challenges ahead. Milk farmgate prices are forecast to remain under pressure with near-term headwinds for dairy commodity prices before returning to better levels in the second half of 2023. Rabobank senior ag analyst Emma Higgins said strict COVID policies key export market China impacted NZ export volumes and returns during 2022, exarbated by the impacts on market access and trade flows of the Russian invasion of Ukraine early in 2022. This led to surging input costs, with higher fuel, fertiliser and finance costs squeezing farmers’ margins throughout the year.
According to the report, these challenges have drained sentiment with government policy impacting agriculture a major source of concern for farmers and the industry. Weakening market prices across multiple sectors is contributing to already low confidence amid a cost-of-living crisis, geopolical fragmentation, a tight labour marekt and climate urgency. Higgins said the first quarter of 2023 looks tough for ag with upside risks of inflation persisting and the risk of recession in several of NZ’s key export markets loom. Inflation will peak in 2023, with the real wage squeeze driving ongoing consumer behaviour shifts towards trading down on food purchases and reducing non-food discretionary spending.