[23 January/Farmers Weekly]

The economic slowdown in China and damage from its trade war with the United States could impact prices for New Zealand’s major export commodities this year according to analysts. Westpac senior economist Anne Boniface highlighted lamb, noting that Chinese demand for the product appears to have been little affected by the economic slowdown, adding that with trade wars likely to remain a downside risk to the growth outlook and a weaker Chinese currency we don’t expect the pace of growth for NZ lamb to be quite as strong over the year ahead. Ms Boniface also noted that Westpac expect record log prices to come under pressure as construction activity in China slows. NZ China Council executive director Stephen Jacobi agrees the China’s economy is certainly slowing while being restructured away from investment-led growth into consumption-led growth, but noted growth still remains high. Analysts also highlighted the swing in NZ foreign policy back towards the US and suggested this may leave China disinclined to offer concessions in the proposed free-trade agreement upgrade.  Nathan Penny, ASB rural economist, drew attention to positive offsets such as relatively firm household demand in China, a favourable NZ exchange rate and good starting levels for commodity prices. He noted that NZ’s meat, dairy and fruit are more exposed to Chinese household demand and less directly exposed to slowing Chinese industrial demand.