Of “Primary” Importance to New Zealand Trade

The global economy is in a volatile condition at present with not only debt problems in Greece but also the concern that Italy will now default on its loans. For the New Zealand economy the primary sector is of significant importance as it makes up 56% of our global exports – see pie chart below.

Most textbooks will stress the importance of demand for exports as part of Aggregate Demand – AD=C+I+G+(X-M) in order to acquire foreign currency and an inflow of money. Although the demand for, and price of, NZ exports depends on how the recent crisis affects the Asian countries, there is the simple fact that supply will also impact on producers. Doug Steel from the BNZ “Rural Wrap” made the comment that the amount we have to sell is just as important.

Anticipated lower horticulture production is largely driven by an expected sharp drop in kiwifruit as a result of the Psa disease. There is also downward pressure on production given last year’s very high yields, on average, across kiwifruit, apples and grapes.For example, a return to average grape yields following last season’s bumper crop would see grape tonnage
pullback around 12%. But it is the outlook for kiwifruit that is most concerning.‘There is no greater issue for the NZ kiwifruit industry today than the risk of Psa-V.’ This is as true today as it was when it was printed in Zespri’s July 2011 Psa Status. Update or indeed since the disease was first discovered in NZ a year ago. The outlook for kiwifruit production is negative, as the disease continues to destroy vines. To us, the severity of the situation cannot be overstated. Meanwhile, the intense search for solutions continues.

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