Dairy exports from New Zealand, which make up a fifth of the nation's total overseas trade, are likely to surge 58% over the next four years on rising prices and demand, according to Ministry of Agriculture forecasts.

Dairy exports will rise to NZ$15.67 billion (US$10.9 billion) by the year ending June 30, 2014, from an estimated NZ$9.94 billion (US$6.92 billion) in the current year, the government said in its Situation and Outlook for New Zealand Agriculture and Forestry report.

Sales by Fonterra Cooperative Group Ltd., the world's largest dairy exporter, and rivals are being buoyed by demand from China. Better returns are encouraging farmers to increase the size of their herds, which will boost production, according to the forecasts.

The ministry projects the national milking herd will increase to more than 5 million by 2014, and production will rise 22% between 2014 and 2010.

Payments to farmers are expected to fall in 2011 because of increased global supply and lower world prices, the ministry said. By 2014, payments will have recovered reflecting increased demand and a lower exchange rate, it said.