Asian demand compensates for falling export prices

Demand from Asia -- particularly China -- would shore up exports from New Zealand's primary sector even as export revenues were expected to fall in the coming financial year, according to New Zealand's Ministry for Primary Industries (MPI).

The ministry's annual Situation and Outlook for Primary Industries report, published Monday, said primary produce prices were falling from relatively high levels.

However, in general prices remained quite favorable, MPI deputy director-general Paul Stocks said in a statement on the report.

"Production this past season has generally been good -- even great for some -- due to favorable climatic conditions," said Stocks.

"Primary industries are continuing to sell more into Asia. With recessionary pressure in Europe, the trend towards Asia has turned into a stampede."

The MPI based its forecast on the continuing high exchange rate holding up "for some time," but ultimately depreciating due to New Zealand's high level of overseas debt, he said.

Dairy production increased a significant 10 percent in the year ending May and the milk price remained strong, but a drop was expected due to weaker international demand and increased production in the European Union and United States, said the statement.

Meat production was also up, but lamb prices were falling back faster and further than the normal seasonal decline after a record high in November last year, as price-conscious consumers in Europe shifted to less expensive meats.

Beef demand and prices had held up because of robust demand from Asian markets, and falls in U.S. and Australian production.

Record volumes of logs were harvested over the last year, with "a large proportion" going abroad unprocessed due to strong demand from China. Export volumes were not expected to increase over the forecast period.

Seafood prices were holding up despite global economic conditions, due to strong demand out of China and Australia.