Dairy farmers are importing record amounts of palm kernels from Malaysia to boost milk production.
Statistics New Zealand figures show imports of the kernels, a by-product of the palm oil industry, reached 950 million kilograms in 2014.
Good milksolids returns have enabled dairy farmers to buy in more feed to further increase production. While it is difficult to monitor barley and other grains bought domestically, it is easier to check palm kernel imports.
The figures are included in the ASB's latest quarterly rural report, which paints a rosy picture of the sector, despite the impending impact of lower dairy prices.
Record dairy and wine production is the feature of the Vintage 2014 report.
Agriculture businesses are bullish about the sector's prospects, reflected in the ANZ's outlook survey, showing optimists outweighing pessimists by a net 40 per cent, and well above the 10-year average mark of 20 per cent.
"You have to go back to 1994 to find such a high level of optimism among agricultural businesses," ASB rural economist Nathan Penny said.
Over the last season, dairy farmers had been rewarded with a "double happy" of record production and record prices. Following the 1.6 per cent dip in production for the 2012-13 season, the increase over 2013-14 should be 10 per cent.
"But farmers need to be wary of rising interest rates, with another lift likely in July. While there are some pretty good specials on offer from individual banks, generally rates are on the up," Penny said.
All commodities were in demand.
Prices for lamb have increased by 4.1 per cent over the past four weeks, with good demand from Europe and China. Numbers of lambs slaughtered were up, but weights were down as flocks recovered from the 2011-12 drought.
Beef prices remain steady. New Zealand farmers now have an opportunity to fill the gap caused by drought in the US and Australia, and prices are tipped to rise through to 2018.
Over the year to March, numbers of beef slaughtered have risen by 3 per cent.
"In both the sheep and beef sectors, the jury is still out on whether farmers are rebuilding their respective flocks and herds. For example, high mutton prices are encouraging slaughter of breeding stock. At the same time, lamb prices are improving, which is encouraging farmers to retain ewes," the report said.
The wine harvest had been a "cracker", said Penny, not only for the quantity which is up almost 30 per cent on the previous year, but also the quality.
Penny said the risk of an El Nino was rising, and would effect wine and horticulture production in particular. Fairfax NZ
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