New Zealand Agribusiness Outlook 2020
While many of the world’s farmers struggle to make a margin, New Zealand agriculture is in the midst of an extended run of profitable seasons. Relative to most other countries, New Zealand has avoided widespread climate disruption and enjoyed a run of strong national production of key ag products. The run of profitable seasons won’t last forever, but 2020 offers more to like.
This is a particularly important time to have positive market settings, as New Zealand transitions to increased sustainability regulation. “Beyond the obvious appeal of a run of profitable seasons, we continue to believe that this is an opportune time for New Zealand to experience such a good run. The transition to increased sustainability regulation will, in the first instance, entail increased costs and, in some cases, reduced productivity, which will be less difficult if the industry addresses from a position of financial strength,” according to Tim Hunt, Head of RaboResearch Australia/New Zealand.
Despite the positive outlook for New Zealand farmers, there is little to support the New Zealand economy towards anything but modest growth in 2020. Rabobank still expects the US to enter recession in late 2020, and, despite the recent ‘phase one’ deal, we also foresee another round of US/China tensions. A US recession and renewal of tensions between China and the US will reduce global investor risk appetite and see a flight to quality (usually USD-denominated) assets.