ANZ has released its AGRI Focus report titled All That Glitters is Gold – which refers to kiwifruit – however it contains information on all agricultural sectors including forestry. The report states that while these are uncertain times are providing plenty of challenges, there are opportunities. Source: Timberbiz
The outlook for some of export products is very much at the whim of how the economies of particular countries perform. For example, returns in the forestry industry are closely linked with construction activity in China. Luckily China boasts one of the few economies that are expected to grow this year, albeit at a much slower pace than normal.
The report says that forestry returns are easing in the global market but remain strong locally. There is strong demand in the domestic market for timber as house builds get back on track, but we fear there will be an easing in the local housing market later in the year as the labour market weakens.
So far, the construction sector remains upbeat in China, but the questions remain as to how long this will be sustained. An overpriced housing market has long been regarded as an economic risk in both China and South Korea. The risk of a housing bubble burst is heightened now that global economic activity has slowed.
Export returns have eased now that stocks have rebuilt in China. Global demand for logs is expected to wane – building, manufacturing and export activity is subdued due to the detrimental impact of COVID-19 on the economic health of global economies.
Given the weak outlook for most economies it is difficult to envisage a lift in log export prices occurring any time soon.
There is no doubt there has been a significant rebound in economic data for most countries as the initial lockdowns eased but as COVID-19 is still a significant (and growing) health crisis in many countries and a vaccine remains some time away, the road to full global economic recovery is going to be long and bumpy.
And how does kiwifruit relate to forestry: the domestic market for posts and poles is strong. Pole demand is underpinned by growth in the kiwifruit industry where they are used to support vines. Demand for posts is also expected to be strong over the next few years as more waterways are fenced on beef, deer and dairy support properties.
Download the full report here ANZ-AgriFocus-20200804
