July 13, 2004
New Zealand Dairy Farm Revenue To Dip
Sentiment in key New Zealand farm export sectors is positive on the back of better commodity prices and improved incomes, the Ministry of Agriculture and Forestry (MAF) said on Tuesday.
The Ministry's annual farm monitoring report said the dairy sector, battered by low prices and poor weather in the previous year, was heading into the new production year "quietly optimistic", while optimism for sheep and beef farmers was "high".
New Zealand's economy is heavily reliant on the agricultural sector. Dairy and meat exports are worth more than NZ$10 billion ($7 billion) a year, accounting for 35 percent of merchandise exports.
Gross revenue for dairy farms is forecast to dip one percent in the coming season after an 18 percent rise in the 2003/04 season.
Sheep and beef farm revenues are expected to rise six percent in the coming season, the report said.
"Most (dairy) farmers are budgeting, and hoping, for a more normal climatic season in 2004/05 and, on the basis of this, an increase in production," MAF regional team leader Phil Journeaux said.
Dairy exporter Fonterra Co-operative Group has forecast a farmer payout of NZ$3.85 ($2.54) per kilogram of milksolids for the 2004/05 season, down from a NZ$4.23 final payout in 2003/04.
Sheep and beef farmer confidence has been bolstered by a pullback in the New Zealand dollar and continuing high prices, especially for lamb.
"Farmer optimism is reflected in higher prices being paid for land, even though buyers are aware of the low return on farm assets," senior policy analyst Chris Ward said.
Overall, farmers seemed slightly pessimistic about next year's wool prices although the ministry forecast a lift in prices in the 2004/05 financial year, the report said.
Dry weather in the South Island region of Canterbury and moist cool conditions in February made for a tough year for arable farmers after a record 2002/03 season.
However, the outlook was generally positive, aided by a mild autumn, volatility in world grain market prices and a generally good outlook for other farming sectors that purchase seeds and feed although costs could rise by more than farmers expected.
World prices for New Zealand's main commodity exports were at record levels in June, continuing the strong recovery of the last two years, buoyed by a turnaround in dairy prices.