The agriculture, horticulture and forestry sectors are essential components of the New Zealand economy. In particular, the agriculture sector possesses world class economies of scale and scope, global market reach and world leading technological capabilities. Productivity growth in agriculture since the early 1970s has exceeded that of all other major sectors, with the exception of transport and communications. Between 1977-78 and 2004-05, gross domestic product (GDP) in New Zealand as a whole grew on average by 2.5 per cent a year. Over the same period the agriculture sector grew by 3.6 per cent a year on average.

The primary sector has always played a fundamental role in New Zealand’s economy. In the wake of the gold rush, exports during the late nineteenth century were dominated by wool, most of which was exported to the United Kingdom. However, the development of refrigerated shipping in the late nineteenth century revolutionised the New Zealand economy. Meat became a major export commodity and, with butter and cheese now viable exports, dairy farming expanded rapidly.

During the twentieth century, the New Zealand economy, founded on its specialised natural advantage, began to flourish. Stronger export returns and on-farm innovations, like aerial top dressing, herringbone milking sheds and livestock improvements, lifted productivity and prosperity. New Zealand’s natural advantage has since expanded to include horticulture, forestry, seafood, tourism and niche manufacturing.

Geography and climate
New Zealand has two main islands — the North and the South — and many smaller islands. A long narrow country, with a total land area of 26.9 million hectares, New Zealand stretches 1600 kilometres from the subtropical northern tip to the cool southern end. Most of New Zealand is higher than 200 metres above sea level and hill country and snow capped mountain ranges dominate the landscape.

Reflecting its location in the southern hemisphere, topography and 15 000 kilometres of coastline, New Zealand has a temperate westerly maritime climate.

Annual rainfall ranges from 380 millimetres in the drier eastern areas to over 8000 millimetres in the wettest areas of the west. New Zealand’s comparative advantage in agriculture is supported by opposing seasons in the northern and southern hemispheres.

Diverse, dynamic and market oriented, the primary sector exploits New Zealand’s sharp regional contrasts and rare climatic extremes. Dairy, meat, wool and forestry remain at the core of New Zealand’s natural advantage. However, diversification and innovation have resulted in the emergence of horticultural crops such as kiwifruit, apples and grapes, while sheep and cattle now share the landscape with deer and arable crops.

At the northern tip of New Zealand lies subtropical Northland, a predominantly dairy producing region. Further south, the warm humid climate and volcanic soils of Waikato make it one of the most productive grass growing regions in the world and New Zealand’s foremost dairy region.

The volcanic plateau of the central North Island is a major area of plantation forest. To the east coast is Hawke’s Bay, dominated by sheep and beef farming, and a premier pip fruit and summer fruit production area. Hawke’s Bay is also a premium grape growing and wine making region, especially for chardonnay and cabernet sauvignon. To the west coast is Taranaki, where consistent year-round rainfall and porous volcanic soils are, like Waikato, ideal for dairy farming.

In the lower North Island, Manawatu/Horowhenua is noted for dairy, sheep and beef farming, and for the production of processed and fresh vegetables. Wairarapa is ideal for sheep and beef production, while the hot dry summers also make it suitable for grape growing. Martinborough in central Wairarapa is internationally known for its pinot noir and sauvignon blanc wines.

At the top of the South Island, Nelson/Marlborough produces fine wool, is known for horticulture, forestry, fishing and shellfish, and is the only region in New Zealand to produce hops. Wines from the region have also won international acclaim.

In the south of the country lie Otago, Southland and Canterbury. The central areas of Otago, on the shoulders of the Southern Alps, are known as the ‘High Country’ and produce fine merino wool. Lower parts of Otago and Southland are important for sheep, deer and cattle farming, and increasingly for dairy production. The broad plains of Canterbury form a premium sheep, deer and arable cropping area and are increasingly important for dairy and process crop production. Irrigation is used extensively to improve production as the summers are hot and dry, and winters are relatively mild and wet.

Economic contribution
The combined importance of New Zealand’s pastoral, horticultural and forestry industries cannot be overstated. In current prices, it is estimated that agriculture, horticulture and forestry, including associated processes and services, contribute a total of approximately 18 per cent to New Zealand’s gross domestic product. The gross value of agricultural production, at the farm level, is a significant component in this overall figure, contributing 4.5 per cent in 2004-05 (unless otherwise indicated, throughout this part of the report, years are April–March).

Value added and contribution to gross domestic product – New Zealand In 2004-05 NZ dollars a 1989-90 1994-95 1999-2000 2004-05   Value Contri- Value Contri- Value Contri- Value Contri- added bution added bution added bution added bution to GDP to GDP to GDP to GDP NZ$m % NZ$m % NZ$m % NZ$m % Agriculture Sheep 824 0.9 755 0.7 802 0.6 736 0.5 Cattle 998 1 969 0.9 972 0.8 944 0.6 Deer 193 0.2 176 0.2 188 0.1 172 0.1 Wool 495 0.5 465 0.4 481 0.4 453 0.3 Dairy 1 227 1.3 1 872 1.7 2 366 1.9 2 675 1.8 Horticulture 717 0.7 924 0.8 1 062 0.8 1 085 0.7 Other 660 0.7 603 0.5 741 0.6 752 0.5 Total 5 113 5.3 5 762 5.2 6 610 5.2 6 815 4.5 Food, beverage and tobacco manufacturing Primary food 1 885 2 2 331 2.1 2 461 1.9 3 247 2.1 Other food   manufacturing 3 119 3.2 3 425 3.1 3 700 2.9 3 856 2.6 Total 4 993 5.2 5 758 5.2 6 172 4.9 7 034 4.7 Agriculture, food, beverage and tobacco manufacturing Total 10 106 10.5 11 520 10.4 12 782 10.1 13 849 9.2 Total GDP 96 400 – 110 958 – 126 933 – 151 094 – a All values have been deflated from the original 1995-96 prices using the producers price index – outputs of agriculture (PPIQ.SUA) – Statistics New Zealand. Sources: Statistics New Zealand; Ministry of Agriculture and Forestry.

Although the contribution of the agriculture sector to gross domestic product has decreased since 1989-90, this has occurred in the context of an increasingly significant transport and communications sector.

The agriculture sector remains a fundamental driver of the New Zealand economy, with agricultural receipts increasing by 33 per cent in value (in real terms) since 1989-90, to represent NZ$6.8 billion of New Zealand’s total gross domestic product in 2004-05. Combined, agriculture and food, beverage and tobacco manufacturing contributed NZ$13.8 billion (9.2 per cent) to gross domestic product in 2004-05.

Average annual growth – New Zealand April–March years 1989-90 to 1994-95 to 1999-2000 to 1989-90 to 1994-95 1999-2000 2004-05 2004-05 % % % % Agriculture Sheep –1.7 1.2 –1.7 –0.7 Cattle –0.6 0.1 –0.6 –0.4 Deer –1.9 1.4 –1.9 –0.8 Wool –1.2 0.7 –1.2 –0.6 Dairy 8.8 4.8 2.5 5.3 Horticulture 5.2 2.8 0.4 2.8 Other –1.8 4.2 0.3 0.9 Total 2.4 2.8 0.6 1.9 Food, beverage and tobacco manufacturing Primary food 4.3 1.1 5.7 3.7 Other food manufacturing 1.9 1.6 0.8 1.4 Total 2.9 1.4 2.6 2.3 Agriculture, food, beverage and tobacco manufacturing Total 2.7 2.1 1.6 2.1 Total GDP 2.9 2.7 3.5 3 Sources: Statistics New Zealand; Ministry of Agriculture and Forestry.

At the subsector level, between 1989-90 and 2004-05, dairy farming and horticulture experienced high average annual growth rates at 5.3 per cent and 2.8 per cent respectively, while in the sheep, beef, deer and wool industries, growth declined. This compares with steady average annual growth in the agriculture sector as a whole of 1.9 per cent between 1989-90 and 2004-05, with the strongest annual growth apparent in the late 1990s (2.8 per cent).

The food, beverage and tobacco manufacturing sector also experienced steady growth over the fifteen years to 2004-05, with an average annual growth rate of 2.3 per cent. Of the two subsectors, average annual growth over the full period was strongest in primary food processing (3.7 per cent), higher than the rate for the whole economy (3.0 per cent). In contrast to the strong average annual growth in the agriculture sector in the late 1990s, food, beverage and tobacco manufacturing slowed to 1.4 per cent a year between 1994-95 and 1999-2000, but picked up to record an average 2.6 per cent a year between 1999-2000 and 2004-05.

Production and exports
New Zealand agricultural producers rely heavily on export markets. Only a small proportion of New Zealand production is consumed domestically, while an average of 90 per cent of pastoral production is exported.

Exports from New Zealand, the European Union and Australia provide over 80 per cent of dairy products traded worldwide, but only 5 per cent of total world dairy production. New Zealand’s reliance on export trade means that farmers are typically exposed to fluctuations in world markets and exchange rates.

Despite this, agriculture produces one of the highest export receipts of any sector in the New Zealand economy, through major products such as dairy, meat, horticultural, wool and other specialised products that supply niche markets around the world. Export receipts for agricultural products totaled NZ$14.1 billion and horticultural products NZ$2.29 billion in 2005-06, accounting for 47 per cent and 7.7 per cent of the New Zealand total respectively. Together, agriculture and horticultural products contributed NZ$16.3 billion in 2005-06, 55 per cent of the New Zealand total ($29.7 billion, fob excluding re-exports).

Composition of merchandise exports – New Zealand April–March years Share of total merchandise exports 1979-80 1989-90 1999-2000 2005-06 % % % % Pastoral farming Dairy 15.5 14.7 18.1 18.9 Meat (incl. animal fats) 24 16.2 13.2 15.7 Wool 18.1 9.7 3.1 2.1 Hides, skins 3.5 4.8 2.1 1.3 Total 61.1 45.4 36.5 38.1 Other farming Fishing 2.5 5.1 4.9 3.7 Forestry na 8.9 12 9.2 Machinery 3.3 6.1 8.9 8.9 Fruit and vegetables 2.5 9.7 9.4 10.7 Other 30.6 29.8 30.4 29.4 Total 100 100 100 100 na Not available. Source: Statistics New Zealand.

Pastoral farming contributes the largest share of total merchandise trade exports from New Zealand, at 38 per cent in 2005-06. However, this is a dramatic reduction from 61 per cent in 1979-80, during the period of high farm subsidies.

The composition of pastoral farming exports changed markedly between 1979-80 and 2005-06. In 1979-80, meat and wool contributed the bulk of total pastoral farming exports; however, the share, particularly for wool, has gradually declined as the relative contribution of the dairy industry has grown. Meat and dairy exports continue to contribute a large proportion of total merchandise exports. In 2005-06 their respective shares were 16 per cent and 19 per cent. However, wool exports’ contribution has fallen dramatically, to just 2.1 per cent in 2005-06.

The composition of merchandise exports has also been transformed between 1979-80 and 2005-06, reflecting farmers’ moves to produce more profitable products such as fruit and vegetables and dairy products. Forestry remains significant, accounting for 9.2 per cent of merchandise exports in 2005-06.

In the past 26 years New Zealand has adapted to a changing world. In 1979-80 the United Kingdom was a large export destination for agricultural products, accounting for 14 per cent of New Zealand’s exports. The UK remains an important market, but now shares that position with Asia, Australia, the European Union and the United States.