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Industrial Structure and Principal Economic Sectors
Primary Industries
The agricultural, horticultural, forestry, mining and fishing industries play a fundamentally important role in New Zealand's economy, particularly in the export sector and in employment. Overall, the primary sector accounts for 7.1% of GDP and contributes over 50% of New Zealand's total export earnings.
Agriculture and Horticulture
Agriculture directly accounts for around 5% of GDP, while the manufacture of primary foods accounts for a further 2.9%. Downstream activities, including transportation, rural financing and retailing related to agricultural production also make important contributions to GDP.
The surge in commodity (particularly dairy) prices through to mid-2008 again highlighted the importance that agriculture plays in the New Zealand economy. High commodity prices boosted disposable incomes, helping to boost domestic demand and GDP growth.
Rising demand from developing countries and supply constraints helped push dairy prices to their highest ever level in both world and New Zealand dollar terms in late 2007. As commodity prices generally have weakened, world dairy prices have fallen by around 50% from their peak in late 2007 and the dairy exporter, Fonterra, has reduced its forecast payout to dairy farmers from $7.90 per kilogram of milk solids in the 2007/08 season to $5.10 for the 2008/09 season. The fall in the New Zealand dollar has partly offset the fall in world prices.
A drought over the 2007/08 summer reduced the supply of dairy products. However, a strong recovery and ongoing dairy farm conversions are expected to ensure a new record for the level of milk production in the 2008/09 season.
Horticultural crops have become increasingly important, with the principal crops being apples and kiwifruit. Other significant export crops include wine, fresh and processed vegetables and seeds. The value of horticultural exports is estimated to be around $3.0 billion per annum.
The following table shows sales of the principal categories of agricultural products for the years indicated, and as a percentage of agricultural sales for 2008.
Gross Agricultural Production(1)
| Year ended 31 March (dollar amount in millions) |
||||||
|---|---|---|---|---|---|---|
| 2004 | 2005 | 2006 | 2007 | 2008 | 2008 % of Total |
|
| Dairy | 5,258 | 5,518 | 4642 | 5182 | 6,461 | 34.1% |
| Agricultural services | 2,254 | 2,433 | 2879 | 3055 | 3,304 | 17.5% |
| Cattle | 2,135 | 2,209 | 2078 | 2184 | 1,879 | 9.9% |
| Sheepmeat | 1,786 | 1,821 | 1742 | 1748 | 1,666 | 8.8% |
| Fruit | 1,318 | 1,336 | 1449 | 1452 | 1,592 | 8.4% |
| Sales of live animals | 732 | 789 | 1006 | 1162 | 1,054 | 5.6% |
| Vegetables | 828 | 739 | 715 | 715 | 740 | 3.9% |
| Crops and seeds | 441 | 374 | 334 | 398 | 506 | 2.7% |
| Wool | 585 | 586 | 545 | 526 | 471 | 2.5% |
| Other horticulture | 299 | 276 | 278 | 280 | 290 | 1.5% |
| Deer | 171 | 187 | 210 | 255 | 251 | 1.3% |
| Non-farm income | 213 | 221 | 205 | 218 | 222 | 1.2% |
| Other farming | 218 | 230 | 171 | 208 | 189 | 1.0% |
| Pigs | 156 | 157 | 164 | 166 | 165 | 0.9% |
| Poultry/eggs | 125 | 137 | 135 | 143 | 148 | 0.8% |
| Value of livestock change | 4 | -77 | 85 | 91 | -12 | -0.1% |
| TOTAL GROSS REVENUE | 16,523 | 16,936 | 16638 | 17783 | 18,926 | 100.0% |
(1) All data estimated.
Forestry
Forestry and logging makes up around 1.1% of GDP and is the basis of an important export industry, with almost 70% of wood from the planted production forests eventually being exported in a variety of forms, including logs, wood chips, sawn timber, panel products, pulp and paper, and further manufactured wooden products, including wooden furniture.
For the year ended September 2008, the value of exports of forestry products was $3,330 million (f.o.b.), 7.8% of New Zealand's total merchandise exports. The largest markets for forestry exports are Australia, Japan and the United States. The Republic of Korea and China are important developing markets.
New Zealand's climate and soils are well-suited to the growth of planted production forests. These forests cover an area of 1.8 million hectares and produce over 99% of the country's wood. Radiata pine, which makes up 89% of the plantation estate, matures in 25 to 30 years, more than twice as fast as in its natural habitat of California. This species has had considerable research investment and has demonstrated its versatility for a wide range of uses. The second most important species is Douglas fir, which makes up 6% of the planted forest area.
New Zealand's total planted forest growing stock at 1 April 2007 was estimated at 434 million cubic metres. For the year ended September 2008, an estimated 19.6 million cubic metres of wood were harvested from production forests. Of this, 6.3 million cubic metres were exported as logs and the balance was manufactured into a range of products, including 4.0 million cubic metres of sawn timber, 1.8 million cubic metres of wood panels (consisting of fibreboard, veneer, plywood and particleboard) and 1.5 million tonnes of wood pulp (made from harvested logs plus residues from sawmills). The wood pulp was then exported as unprocessed pulp (814,000 tonnes) or manufactured into paper and paperboard (871,000 tonnes, including from recycled paper).
Forecasts indicate that annual wood availability could increase from the current level of 20 million cubic metres (year ended June 2008) to around 25 million cubic metres by 2016. Market conditions and logistical constraints (availability of logging crews, transport capacity, and wood processing capacity) will dictate how quickly the additional wood is actually harvested.
The output of the forestry and logging sector fell 3.3% in real terms in the year to June 2008 following weak international prices over several years. Demand in major export markets is currently flat to declining with log markets potentially more positive than the demand for processed wood products. However, additional wood availability will support additional exports as market conditions improve and commodity transport costs fall.
Fishing
New Zealand has an Exclusive Economic Zone (EEZ) of 3.1 million nautical square kilometres supporting a wide variety of inshore fish, some large deep-water fin fish, squid and tuna. New Zealand's unpolluted coastal waters are also well-suited to aquaculture. The main species farmed are Pacific oyster, green-lipped mussels and quinnat salmon.
Fishing is a major New Zealand industry and an important merchandise export earner. Fish and other seafood accounted for $1,145 million in export revenues in the year ended September 2008, about 2.7% of total merchandise exports. The most important export species are green-lipped mussels, hoki, mackerel, squid and tuna. Smaller volume but high value exports are rock lobster, abalone and orange roughy. The main export markets are the United States, Japan and Australia.
The conservation and management of the fisheries is based on a quota management system designed to protect the future sustainability of the fisheries while facilitating their optimum economic use. The system uses market forces, together with scientific assessments of fish stocks, to allocate fishing rights without arbitrarily restricting fishing methods.