New Zealand's farm export returns are being badly hurt by deteriorating global economic conditions, according to the Primary Industries Ministry.

The ministry, in a half-year update released this morning, is picking farm export revenue for the year to June 2013 to be around $27.5 billion, down 5 per cent on the previous year's income of $29.2b.

Farm exports are the equivalent of about 13 per cent of total gross domestic product.

The update shows strong pastoral production so far this season.

"This is partly due to favourable climatic conditions during the previous season which left breeding stock in good condition, and also ongoing expansion of the dairy herd," says the ministry's economic information and analysis manager, Chris Jones.

However, a continuing economic slowdown, particularly in the traditional European markets, is causing weaker demand for some New Zealand products such as lamb.

The strengthening of the New Zealand dollar against most major trading currencies in recent months is also having a dampening effect. 

Key points:

* International dairy prices are expected to recover over this season and beyond.

* Lower lamb prices are expected, resulting from weaker demand in key European markets.

* Beef prices are expected to remain firm over the next two years, as North America production recovers from widespread drought.

* Forestry earnings will remain under pressure over the next few years, due to subdued demand from major export markets.

* Horticultural exports are on track to reach $3.5 billion in the year to March 2013, with higher in-market prices expected to offset lower volumes of kiwifruit and wine.

* The bacterial vine-killing disease Psa-V has spread to nearly all kiwifruit growing regions, and will adversely impact gold kiwifruit exports in the year to March 2014.

- © Fairfax NZ News