Dairying income set to leap

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Dairy income is tipped to rocket over the next year, earning the country an extra $2.3 billion.

However, at the same time the payout to farmers is expected to slide, from this year's $6.10 a kilogram to $5.60.

The predictions come from the Agriculture and Forestry Ministry's latest situation and outlook report which looks at trading prospects for the next five years.

The ministry is generally upbeat, forecasting higher returns from dairy, beef, lamb, wool, kiwifruit and forestry.

It expects milk production to leap 14 per cent over the next year as farmers recover from drought and to go on growing as dairy conversions continue.

Dairy earnings are tipped to jump from just under $10 billion this year to more than $12b next year and to be at $15.6b by 2014. After the payout's fall over the next two years it is forecast to climb to be $7.21 in 2014.

Ministry head Murray Sherwin said a dramatic growth in trade with China had helped New Zealand ride out the global recession. Earnings from primary product exports to China rose 49 per cent to $2.19b in 2009, with dairy and forestry the big contributors. "Most of our other trading partners have returned to growth as well, while the demand associated with growing incomes in key developing economies is ensuring conditions for food exporters have been buoyant," he said.

However, several uncertainties hung over the outlook. Dairy product prices had become volatile over the past few years and rapid price shifts could not be ruled out.

High debt in some western countries would also pose risks for the global economy. "All in all, our exporters can afford to be optimistic about the medium-term picture, but short-term fluctuations in conditions are inevitable."

- © Fairfax NZ News