Strong primary sector outcomes, but patches of caution remain

The primary sector remains an important driver of economic activity in 2025, with generally rising export values across a number of areas. Despite clear risks to global growth, exporters have substantial momentum behind them at current. Global markets are clearly still demanding Kiwi food and beverage products, and at higher prices – mostly.

This note provides a summary of key parts of the New Zealand primary sector, finding stronger outcomes across dairy, meats, horticulture, and part of the seafood mix. Not all export groups are doing as well, with forestry and crayfish in a tougher spot. Although on-farm costs have stabilised and are starting to ease slightly, caution remains, with drier conditions already hitting a number of areas.

Dairy production data to February 2025 shows milk solids collected nationally are sitting up 1.9%pa on average over the last 12 months. The season to date is up 3.2%, with the gap explained by lower collections over March to May 2024. Separate Fonterra collection data by island shows slightly stronger growth milk production in the South Island than the North Island, consistent with the current pasture situation.

At the current volume of milk solids, a $10/kgMS milk price would deliver a $19.2b pay-out, up around $4.5b from the prior season’s estimated pay-out. The current situation is slightly unusual – New Zealand’s higher production is occurring amid lower trend production globally, supporting higher prices. Milk production across the Americas is lower, with a 6.5% drop in annual production in Argentina over the 2024 calendar year, a 1.2%pa fall in Uruguay, and a 0.2% fall in the US. Production is higher in Australia (+2.4%pa) and Europe (+0.8%pa).

Meat prices continue to be a better place than last year, although kill volumes remain lower. Infometrics analysis of AgriHQ data shows beef prices in a strong position, with an average slaughter price of $7.11/kg in February, up 24% from a year ago – and the first time beef prices have been above $7/kg on a monthly average basis. Lamb prices are at a healthy level too, up 33% over the last year to sit at just over $8/kg in February. However, 2024/25 prices are still below levels seen in 2021/22. Mutton prices have increased the most in percentage terms, up 71%pa in February, but at around $4.10/kg, are still well off 2021/22 prices.

Livestock kills data from Stats NZ shows a considerable drop-off in meat production in the South Island. Total meat weight killed and graded over the three months to January 2025 was nearly 13% lower in Canterbury than a year ago, and down 5.1%pa in Otago/Southland. The Canterbury result is skewed by the closure of the Smithfield meatworks, but lower volumes across the South Island are evident. These results dragged the national total down 1.6%pa. The North Island has seen stronger kills, with a 6.1%pa rise in meat weight graded in Hawke’s Bay/Gisborne, and a 3.2%pa pick up in the upper North Island. The difference in island trends is likely a combination of both feed availability and lower animal numbers overall. Less feed availability in the North Island, due to drier conditions, means more animals head to the works as they can’t be readily or cost-effectively fed.

Horticultural exports remain in rude health, with total fruit and nut export values up 38%pa over the 12 months to February 2025. Kiwifruit were the driving force, with a 44%pa increase in export value over the same period as prices remained high but volumes of fruit dispatched rocketed higher. Apples also saw good growth, with export values up 17%pa over the same period, with both price and volume growth contributing.

Cherries had an absolutely bumper season, with export volumes lifting 33% to over 5m kgs, the first 5m+ season ever. With prices remaining stable at record-high levels on average, orchardists are in a strong position.

Wine exports, although still challenging, have started to stabilize. Wine export values were just 0.4%pa lower over the February 2025 year, arresting the decline of wine exports over 2024.

The trend for forestry activity has been largely flat recently, and are coming off a low base. Quarterly roundwood removals rose slightly, by 1.7%, in the December quarter from September. However, recent removals were still 2.4% lower than a year ago. Annual removals totalled 32.7m cubic metres over the 2024 calendar year, which was still 8.7% below pre-pandemic (year ending December 2019) levels.

These trends align with export activity, with the value of New Zealand forestry products totalling $5.9b over the 12 months to February 2025. That export value is 3.1% higher than a year ago, but still 13% down on forestry export values in mid-2019.

The seafood market is mixed, with strong growth in fish exports but lower exports for crustaceans. Fish export values rose 9.5%pa over the February 2025 year, with improving prices as the volume of fish exports dropped marginally. Crustacean export values dropped 18%pa over the same period, with lower prices and volumes.

Crayfish (rock lobster) have been the key driver of this decline, with Australia re-entering the export market into China at the end of 2024, raising supply, adding competition, and lowering prices for Kiwi exporters.

On-farm costs continue to show signs of stabilisation. The Farm Expenses Price Index (FEPI) published by Stats NZ fell 0.1% in the December 2024 quarter from a year earlier, the second consecutive – slight – decline in the FEPI.

Interest rates for farmers are down 10% from a year ago, and fuel prices are down 7.0%pa. Fertiliser prices have dropped further too, down 0.6%pa, and now sit 13% lower than peak prices seen in late 2022.

Results across different types of operations are more mixed. Sheep and beef farm costs eased 0.5%pa, and dairy farm costs fell 0.4%pa. Cropping farm operations saw no change in costs, and other livestock farm costs rose marginally, up 0.1%pa. Horticulture and fruit growing operations saw a 1.0%pa rise in costs, with cultivation and harvest costs higher.

Although recent cost trends have shown stabilising costs, and even some slow improvement, these trends are off a high cost base. On-farm costs at the end of 2024 were still 25% higher than at the end of 2020 on average.

The Government has classified drought conditions across large parts of the North Island and the top of the South Island to be medium-scale adverse events, unlocking rural support. Northland, Waikato, Manawatu, Taranaki, and Marlborough-Nelson-Tasman are all covered by the declarations. The New Zealand Drought Index shows dry and very dry conditions across most North Island regions, with parts of Waikato, Auckland, and Northland being extremely dry. However, the NIWA35 Drought Forecast shows an expectation that conditions improve by mid-April.

Palm Kernel Expeller (PKE) feed imports have jumped in response, up 34%pa over the 12 months to February 2025 to 2.2m tonnes – the largest annual total since early 2018 and only 4.9% below record levels. Recent imports have been large, with December to February imports of PKE sitting 74% higher than the same time last year.