Economic Week - May 25
by Nick Clark
Milk price boost
Fonterra this week increased its 2017/18 forecast Farmgate Milk Price by 20 cents to $6.75 per kgMS. According to Fonterra the boost in milk price reflected a global supply and demand picture that continues to be positive for farmers.
However, the higher milk price put pressure on Fonterra’s earnings at a time when it is also digesting the payment to Danone and the impairment of its Beingmate investment. So Fonterra also revised down its forecast dividend range for the full year down to 15-20 cents per share (previously 25-35 cents per share).
This will disappoint non-farmer investors but overall the total forecast cash payout for farmers will increase slightly to $6.90-$6.95 per kgMS (previously $6.80-6.90), making it the third highest payout this decade.
Earlier this month Fonterra announced a higher opening forecast for the 2018/19 season. It is forecasting a farmgate milk price of $7.00 per kgMS.
Exports and imports at record highs
Goods exports were $5.1 billion in April 2018, according to Statistics NZ’s monthly Merchandise Trade Statistics. This was up 7.3% on April 2017 and set a new record for an April month.
Fruit was the biggest contributor to the increase in exports, up $207 million (or 50.6%) on April 2017 but the pastoral sector also had a positive month. Exports of meat & edible offal were up $94 million (15.0%); milk powder, butter and cheese up $68 million (6.2%); and wool up $3 million (7.9%).
Goods imports were up even more strongly than exports, jumping 15.1% to $4.8 billion. This was also a record for an April month. There were big increases for petroleum and products (up 55.6%); vehicles, parts and accessories (up 24.5%); and mechanical machinery and equipment (up 18.7%).
There was a modest goods trade surplus for the month - $263 million. April is usually a month for surpluses and this one was smaller than average.
For the year ended April 2018, goods exports were worth $54.9 billion (up 12.0% on the year ended April 2017). Exports of milk powder, butter and cheese were worth $14.2 billion (up 20.4%), meat & edible offal were worth $6.9 billion (up 15.0%). Wool exports were worth $531 million (down 4.1%).
Goods imports were worth $58.7 billion (up 11.6%), with vehicles, parts and accessories worth $9.1 billion (up 11.7%); mechanical machinery and equipment worth $8.5 billion (up 19.7%); and petroleum and products worth $6.0 billion (up 26.8%).
There was a goods trade deficit of $3.8 billion for the year ended April 2018.
Better autumn for farm sales?
There were 418 farm sales in the three months ended April 2018, according to the Real Estate Institute of NZ’s Rural Market Statistics. This was up 7.7% on the three months ended March 2018 but was down 11.6% on the same three-month period last year.
For the full year to April 2018, 1,468 farms were sold, 19.0% fewer than were sold in the year to April 2017. There 10.8% more finishing farms sold, 2.9% fewer dairy farms, 37.4% fewer grazing and 39.3% fewer arable farms sold.
The median price per hectare for all farms sold in the three months to April 2018 was $27,309, down 3.7% on the same three-month period last year. It was also down 0.4% compared to the three months to March 2018.
The REINZ All Farm Price Index rose 1.5% in the three months to April 2018 compared to the three months to March 2018 and it was up 2.0% compared to April 2017. However, the Dairy Farm Price Index was down 2.0% and 5.2% respectively. The REINZ All Farm Price Index adjusts for differences in farm size, location and farming type, unlike the median price per hectare, which does not adjust for these factors.
REINZ observed that autumn conditions have been very good for farming, unlike last winter and spring, and this might be reflected in the market for farms. On the other hand, Mycoplasma bovis is causing increasing anxiety, especially among dairy and beef farmers.
Net migration slipping
Annual net migration is down nearly 5,000 from its high point a year ago, according to Statistics NZ’s monthly International Travel and Migration Statistics.
New Zealand saw a net migration gain of 67,000 migrants for the April 2018 year. This compares to the 71,900 net migration gain in the April 2017 year. The gain for the April 2018 year was made up of 130,500 migrant arrivals and 63,400 migrant departures.
The decline in net migration was largely because more non-New Zealand citizens were leaving the country. Migrant arrivals were actually up for the year.
Tourism dips in April
Visitor arrivals fell 28,000 to 283,900 in April 2018, compared with the same month last year, according to Stats NZ’s monthly International Travel and Migration Statistics. The drop was particularly pronounced for visitors from Australia. This was mainly due to April 2017 seeing Easter, Anzac Day and the school holidays falling in the same month.
Despite April’s dip, visitor numbers continued to grow on annual basis. Arrivals for the April 2018 year increased 5.4% to 3.79 million.
NIWA Soil Moisture Data
NIWA’s latest soil moisture maps (as at 9am Thursday 24 May) show Gisborne as the main area where conditions are dryer than usual, with a couple of other smaller pockets (e.g., around Herbertville and the eastern tip of Banks Peninsula).
Exchange Rates
|
NZ Dollar versus
|
This Week
(24/5/18)
|
Last Week (17/5/18)
|
Last Month (24/4/18)
|
Last Year (24/5/17)
|
|
US Dollar
|
0.6915
|
0.6913
|
0.7123
|
0.7015
|
|
Australian Dollar
|
0.9160
|
0.9183
|
0.9373
|
0.9399
|
|
Euro
|
0.5912
|
0.5852
|
0.5837
|
0.6271
|
|
UK Pound
|
0.5178
|
0.5102
|
0.5113
|
0.5409
|
|
Japanese Yen
|
75.74
|
76.25
|
77.51
|
78.43
|
|
Chinese Renmimbi
|
4.4188
|
4.3972
|
4.4983
|
4.8358
|
|
Trade Weighted Index
|
72.82
|
72.61
|
73.99
|
76.13
|
Source: Reserve Bank of NZ
Wholesale Interest Rates
|
|
This Week
(24/5/18)
|
Last Week (17/5/18)
|
Last Month (24/4/18)
|
Last Year (24/5/17)
|
|
OCR
|
1.75%
|
1.75%
|
1.75%
|
1.75%
|
|
90 Day Bank Bill
|
1.98%
|
2.00%
|
2.04%
|
1.97%
|
|
10 Year Government Bond
|
2.79%
|
2.83%
|
2.93%
|
2.86%
|
Source: Reserve Bank of NZ