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Mixed outlook for New Zealand agriculture in 2016 - industry report

New Zealand's agricultural sector is looking at mixed prospects in 2016, with dairy facing another difficult year but most other sectors expected to perform well, according to a new industry report.

In its Agribusiness Outlook 2016, global agricultural specialist Rabobank says dairy prices continue to be weighed down by strong supply growth, particularly out of Europe after the recent removal of quotas.

Releasing the report, Rabobank general manager Country Banking New Zealand Hayley Moynihan said the recovery in dairy prices now risks arriving too late to enable a confident start to the 2016/17 season.

"Dairy prices are expected to begin to pick up in the latter half of 2016, but the timing of the recovery will be driven by how quickly the brakes can be applied to global milk production," she said.

"With cash flows in the dairy sector expected to remain tight throughout 2016, thankfully there is little change foreseen in operating costs such as fuel, fertiliser and interest rates, although supplementary feed costs will hinge on pasture growth."

"A weak and falling NZ currency will provide only partial compensation for low international dairy prices for local farmers, particularly given hedging already in place.

While dairy faces another tough year, Rabobank foresees a generally strong year ahead for most other agricultural sectors.

Rabobank general manager of Food & Agribusiness Research Tim Hunt said solid demand in key offshore markets, recent progress in export development and generally tight global supply is likely to bring another good year for New Zealand producers of beef, wool and horticultural products.

"While beef prices have lost some ground in recent months, they remain well above multi-year average levels, and are expected to receive support from a generally tight global market," he said.

"Wool producers will face headwinds from cheap synthetic fibres, but see support from declining production in New Zealand and Australia."

Mr Hunt said the wine industry was looking set for a better year in 2016, with improved climatic conditions likely to underpin an increase in production, average prices holding up well and good momentum for New Zealand product sales in the US and Chinese market.

"The trend in consumer preferences is positive for New Zealand wine, as we see a shift towards higher-priced wine and lighter styles," he said.

Lamb producers face a less buoyant 2016, Mr Hunt said. "Challenging seasonal conditions have driven a surge in slaughter rates early in the season, with prices likely to remain under pressure given generally sluggish demand," he said.

The Rabobank Agribusiness Outlook found currency, financial volatility, the Chinese economy, climate and oil prices were all swing factors, the Chinese economy, climate and oil prices were all swing factors which had the potential to impact the prospects for New Zealand agriculture in 2016.

Rabobank New Zealand is a part of the international Rabobank Group, the world's leading specialist in food and agribusiness banking. Rabobank has more than 115 years' experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of approximately 8.8 million clients worldwide through a network of more than 1000 offices and branches. Rabobank New Zealand is one of New Zealand's leading rural lenders and a significant provider of business and corporate banking and financial services to country's food and agribusiness sector. The bank has 33 branches throughout New Zealand. Rabobank also operates RaboDirect, New Zealand’s first internet-only bank specialising in savings and deposits.

Media contacts:

Denise Shaw
Head of Media Relations
Rabobank Australia & New Zealand
Phone: +61 (0)2 8115 2744 or +61 (0)439 603 525
Email: denise.shaw@rabobank.com

David Johnston
Marketing & Media Relations Manager
Rabobank New Zealand
Phone: 04 819 2711 or 027 477 8153
Email: david.johnston@rabobank.com