New Zealand’s food and fibre sector is expected to grow by seven percent by June, driven by tighter global food supplies and higher returns.

A favourable growing season is also set to boost crop and protein volumes, creating a “sweet spot” where both volume and value rise.

The Ministry for Primary Industries’ latest Situation and Outlook for the Primary Industries (SoPI) report brings this promising news for New Zealand’s primary exports.

This positive outlook follows a period of resilience for New Zealand farmers and growers. While 2024 presented challenges, including lower returns for some sectors, and 2022 and 2023 saw the impacts of Cyclones Hale, Gabrielle, and other storms on crop production, the industry continues to adapt and move forward with strength and innovation.

All sectors are forecast to benefit. Horticulture leads with an anticipated 12 percent revenue increase, followed by dairy with a 10 percent uplift. Meat and wool are set for a five percent rise after sluggish years, while forestry is expected to grow by four percent. Given that some sectors, such as dairy, have seen cost surges of up to 30 percent in three years, these gains are crucial for reinvestment and growth.

However, uncertainties remain, particularly as the global impacts of Trump’s trade policies are yet to be fully realised. While New Zealand has yet to be directly affected, our $2.9 billion trade surplus with the United States – $NZ 14.5 billion in exports versus $NZ 11.6 billion in imports – could attract tariff scrutiny from our second largest export destination.

Bayleys chief operating officer and acting national director rural, Duncan Ross says as the primary sector stabilises, processing and marketing models will continue to evolve to meet global demand.

“New Zealand farmers and growers are among the best and most productive in the world. Our marketing and processing models should constantly be challenged and evaluated to ensure New Zealand’s primary exporters overcome our geographical distance and entrance barriers to markets, particularly in a potential tariff environment.

“The current volatile global marketplace certainly challenges the assumption of free trade as a given,” he says.

Price and liquidity have been a function of farmgate returns, alternate land uses, interest rates and – importantly – access to funds. The volume of transactions varies by sector, with dairy and kiwifruit land currently more active than sheep and beef farms, due to recent differing profitability and investment appeal.

No silver bullet

To counterbalance New Zealand’s distance from its export markets, our growers and farmers have successfully capitalised on this country’s natural resources, rich soils and ideal climate to produce premium quality goods and market them effectively in crowded and competitive marketplaces.

A range of processing and marketing models have evolved, often stemming from co-operative farmer-grower ownership models and adapting to become either single desk (kiwifruit), hybrid co-operatives (Silver Fern Farms), fully corporate (apple and wine industry) or large-scale co-operatives (Fonterra).

In recent years some legacy models are facing greater challenges than ever, including some of the more traditional co-operative structures. Meanwhile, legislated single-desk marketers like Zespri are thriving, while hybrid operations like Silver Fern Farms have proven farmers and non-farm shareholders can work together successfully.

Whatever model exists across all products in the primary sector it is becoming apparent no single “silver bullet” model exists that will meet the particular features of each product.

Kiwifruit boom

The horticultural sector is set for record growth this year, with a 12 percent surge pushing total export earnings to $8 billion. Kiwifruit leads the charge, breaking the $3 billion export mark – matching lamb exports for the first time.

Zespri’s single-desk model has been key to this success, creating a globally trusted brand through consistent quality, pricing, and packaging. Though kiwifruit accounts for just 0.015 percent of the world’s traded fruit value, this model has amplified its market presence, securing economies of scale in shipping and marketing.

Recent research by Kantar ranks Zespri as the world’s top fruit brand across its 15 core markets, ahead of giants like Dole, Chiquita, and Del Monte. However, rising competition has driven the need for year-round supply, prompting increased investment in Zespri Global Supply (ZGS). Growers recently approved an expansion of SunGold planting – 420ha this year and 2,500ha over six years – primarily in Italy, doubling the 30 million trays currently grown in Europe and Asia.

Zespri’s head of northern hemisphere supply, Nick Kirton, says overseas distributors have welcomed this move, with skilled growers eager to join the programme. Zespri CEO Jason Te Brake emphasises the importance of maintaining a strong brand.

"It’s something we can’t take for granted, especially with increasing competition in the produce category."

Bayleys Bay of Plenty Country sales manager Matt Clutterbuck notes that kiwifruit is rebounding strongly after tough post-COVID seasons, with robust crop volumes and returns.

“We’re seeing strong corporate and syndicate investment into large greenfield orchard sites over 10ha,” he says. “There’s still a healthy margin in developing new orchards compared to buying established ones, and investors are seeking scale.”

Last year’s decision to continue allowing the bud treatment chemical Hi-Cane provided further confidence for corporate investors to push ahead with conversions. Meanwhile, smaller owner-operator orchards are in short supply, as strong returns encourage existing owners to hold onto their properties.

With $3 billion in export earnings on the horizon, optimism is high among growers who see their sector on a solid path forward.

Apples rebound

Apple growers are looking forward to a return to profit after two challenging years, particularly in the wake of Cyclone Gabrielle, which damaged 50 percent of Hawke’s Bay and Gisborne’s production areas. Thanks to rapid remediation efforts, orchard crop losses were limited to 10 percent across Hawke’s Bay and Gisborne, far better than the anticipated 25 percent.

The 2025 harvest marks a major recovery milestone, with apple and pear export revenue expected to reach $1 billion for the first time by June – a 12 percent annual increase. This growth is driven by premium varieties such as Envy, Rockit, and Dazzle, which now contribute nearly a third of export earnings, surpassing the industry staple, Royal Gala, at 22 percent.

While Hawke’s Bay remains the core production region, expansion further south is gaining momentum. The sector’s shift away from a single-desk model two decades ago has fostered multiple corporate players, each developing proprietary apple varieties tailored to specific markets for premium pricing.

New Zealand Apples and Pears Inc (NZAPI) chief executive Karen Morrish says the industry’s resilience is paying off and this year’s crop is a return to form after several challenging years and is reflective of a move towards the more high-value varieties.

"New Zealand apples and pears are renowned as a premium product. We’re not the biggest supplier, but we punch well above our weight globally. Our growers take pride in producing fruit that is healthy, clean and sustainable, and this year’s crop is exactly that.”

The success of premium apple brands like Rockit is spurring investment, with Rockit now expanding into Canterbury to diversify its growing regions. Partnering with the Turley family, an initial 20ha has been planted at Rangitata, with plans to increase this to 100ha this year, supporting a target of exporting 200 million apples.

Wine rebalancing

Kiwi winemakers started 2025 on a high, with New Zealand leading the still white wine category in UK sales in the four weeks over Christmas. Sales rose seven percent in value and nine percent in volume compared to the previous year. However, global challenges remain, with shifting drinking habits and surplus wine stocks from the pandemic-driven boom pressuring markets.

NZ Winegrowers market manager for UK-Europe Chris Stroud notes that sauvignon blanc is still New Zealand’s viticultural bread and butter.

"New Zealand sauvignon blanc remains the key driver, accounting for £1 of every £2 spent on sauvignon blanc in the UK.”

While growers in the United States and Australia are cutting vines due to declining consumption – 3.5 billion fewer bottles last year – New Zealand’s early adoption of a strong sustainability focus provides a competitive edge. The industry’s commitment, formalised in 2007 through the Sustainable Winegrowing New Zealand (SWNZ) programme, remains a key selling point.

“The industry leaders saw the potential of an export-focused wine industry and the importance of sustainability in building New Zealand’s premium reputation,” says Fabian Yukich, chair of New Zealand Winegrowers.

Marlborough remains New Zealand’s wine export powerhouse, with over 20,000 planted hectares of sauvignon blanc.

Bayleys Marlborough franchise director Glenn Dick says the exceptional 2024 vintage helped buoy international demand, testified by the success enjoyed in the UK leading up to Christmas.

However, he cautions that a recent correction in the dynamics of supply and demand mean there is more pressure on pricing, with stock levels more closely matching global markets.

“Margins are expected to stabilise in the coming year as stock levels are rebalanced,” he says.

Vineyards with long-term supply contracts continue to attract strong investor interest, with counterparty strength, contract tenure and pricing terms key investment considerations for those looking to enter the market, he says.

“Those growers investing in their vineyards by replacing aging vines to lift yields and align with market tastes, while also taking on board innovations in vine spacing and variety selection are gaining longer term advantages, particularly as climate variability continues to challenge traditional growing methods.”

New Zealand’s viticulture sector is adapting to ensure resilience and profitability despite global headwinds.

Strong dairy returns

New Zealand’s dairy sector is enjoying a welcome upswing, with forecast milk solid payments surpassing $10/kgMS. This rebound, following last year’s drop, is timely as farmers contend with a 30 percent cost increase over the past three seasons. The 10 percent lift in export revenue will inject $25.5 billion into the economy by June, reinforcing dairy’s critical role in New Zealand’s recovery.

A weakening New Zealand dollar has helped offset global price fluctuations, while lower production from major competitors – the U.S. and EU – has strengthened demand for New Zealand-sourced product.

Meanwhile, the national herd is becoming more efficient. Despite cow numbers declining from 5.018 million in 2014-15 to 4.7 million, average production per cow has risen six percent to 400kgMS. This improved per-cow performance also contributes to lower emissions per kilogramme of milk solids, aligning with sustainability goals.

With interest rates easing and on-farm inflation predicted to cool to just 0.2 percent this year, dairy farmers are looking at stronger margins. The average farm’s breakeven point sits at $7.40/kgMS, ensuring healthy profits with current payouts.

The buoyant dairy sector is translating into a more active rural property market.

Bayleys Canterbury salesperson Ben Turner reports strong buyer confidence, with 26 dairy farm sales completed over the spring selling season in Canterbury. Prices have ranged from $48,000/ha to $63,000/ha, with increasing use of equity partnerships – often between sharemilkers and landowners – to facilitate purchases. “There’s renewed confidence in the dairy sector, driven by improved commodity prices and falling interest rates. This liquidity is spilling into the wider rural economy,” says Turner.

However, farming succession remains a challenge. The rising cost of land and capital requirements for farm ownership are making it harder for younger farmers to take over family businesses. Many are turning to sharemilking or equity partnerships as stepping stones to ownership. Meanwhile, corporate and syndicate investments continue to grow, providing alternative pathways for capital flow into the sector.

The structure of New Zealand’s dairy processing industry has matured significantly since Fonterra’s formation. While it once controlled 95 percent of the country’s milk processing, its share has now settled at 84 percent as corporate processors gain ground. This competitive environment ensures greater options for farmers while maintaining industry stability.

Fonterra’s recent shift away from consumer brands to focus on business-to-business (B2B) and ingredient sales has been well received. CEO Miles Hurrell highlights the disproportionate resources consumer brands required relative to their returns, making this pivot a strategic move.

Turner says, as New Zealand’s largest dairy co-op continues to refine its operations, its strong direction is adding further confidence to the market.

With improving global demand, greater efficiency at the farm level, and more liquidity in the rural property sector, the dairy industry is in a strong position heading into the next season.

Red meat headwinds

New Zealand’s red meat sector, particularly sheep meat, has faced headwinds as Chinese demand softened and Australian supply surged. Meanwhile, wool prices continue to languish, removing a traditional buffer against lower meat returns. This has driven a shift toward self-shedding sheep and increased cattle-to-sheep ratios, particularly on easier country.

In contrast, beef exports remain strong, with U.S. demand lifting prices to a record NZ$12/kg – well above last year’s $9.50/kg. New Zealand’s grass-fed beef plays a key role in U.S. ground meat blends, benefiting from lower fat content compared to grain-fed alternatives.

Corporate ownership in meat processing, such as ANZCO and Affco, has brought efficiency gains, particularly in beef processing. These modern, well-equipped plants contrast with the legacy farmer co-operatives like Alliance, which faces pressure from a higher reliance on sheep processing.

The industry’s shifting dynamics are evident in the closure of Alliance’s Timaru plant, marking what could be the beginning of broader rationalisation, especially in the South Island. Declining livestock numbers and land-use changes toward dairying are challenging the viability of older processing models.

A potential restructuring of the sector is on the horizon, with some industry leaders predicting a shift toward a single dominant processor – similar to Fonterra’s role in dairy – complemented by smaller corporate-owned operators. This could bring significant efficiencies, with a 2015 report suggesting a two-co-op merger could have unlocked $400 million in gains over five years, plus $1 billion in plant rationalisation savings.

The evolving red meat sector is influencing rural property liquidity. Sheep and beef farms, particularly in regions where land use is shifting toward dairy or forestry, face varied buyer interest. While high-performing beef farms remain attractive, traditional sheep properties must adapt to retain value.

Mirroring the dairy sector, farm succession remains a key challenge, with younger farmers facing high capital entry barriers. Equity partnerships and corporate investment are increasingly shaping the ownership landscape.

If processor consolidation proceeds, the sector could see improved efficiency, stronger global positioning, and increased marketing power for New Zealand sheep meat. With export prices forecast to rise, a more streamlined industry structure could provide both farmers and investors with greater long-term certainty in a changing rural economy.

Collective benefits

As New Zealand’s primary sector continues to evolve to meet changing consumer needs, compliance and regulatory requirements and shifting global trade policies, cross-sector collaboration will be critical in shaping a resilient future, Duncan Ross says.

“Ensuring the next generation of farmers and growers can access pathways to ownership – whether through sharemilking, equity partnerships, or corporate investment – will help sustain the industry’s long-term viability.

“New Zealand’s diverse primary industries have historically thrived by embracing different models of processing, marketing, and investment and it’s clear there is no one-size-fits-all solution.

“By learning from each other’s successes and challenges, sectors can refine their approaches to global trade, efficiency, and sustainability. With strategic adaptation, collaboration, and forward-thinking investment, New Zealand’s primary industries are well-positioned to navigate uncertainties and seize future opportunities.”

Meanwhile, liquidity in the rural property market remains closely tied to sector performance, with dairy and kiwifruit leading investment interest. Understanding these trends and adapting land-use strategies accordingly will be essential for maintaining strong returns and encouraging new entrants.