Buoyant agriculture set to benefit NZ economy – FMG chairman

24 June 2011

New Zealand is set to benefit from a buoyant agriculture as high commodity prices throughout the industry begin flowing through to the rest of the economy, predicts Greg Gent, chairman of FMG insurance company.

The agricultural sector has never had higher commodity prices, Mr Gent said.

Typically it took 18 months for the benefits of a buoyant agriculture to flow through to the rest of the economy.

“We’ve been through a fascinating period. We’ve got a global recession but mixed with that, we’ve probably never had higher commodity prices. Certainly in my time in agriculture, I’ve never seen all sectors buoyant at the same time.”

Mr Gent said farmers were using this year to consolidate debt under pressure from the banks so the benefits hadn’t yet filtered through to the rest of the economy. He saw this year as a bellwether for the future, particularly as it looked like commodity prices in the next year would also be high.

“The difference will be a bit of freeing up from the banks, farmers having got their balance sheets in better order.

“What typically happens is when agriculture does well, there’s normally an 18-month lag before we start to see the rest of New Zealand improve. I’d like to think, Christchurch aside, that we’ll begin to see that this year.”

The driver for the buoyant prices could be seen around the developing world – in particular, China, India and Indonesia which contain nearly half the world’s population.

“China’s obviously large for us and our government’s working very hard on getting a free trade agreement with India. If we can pull that off, that will give us a nice balance.

“That is what is underpinning our future. Those developing nations are getting wealthier quickly and they need feeding. As long as that story continues, I think we’ve got a lot to look forward to.”

ENDS

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