Farm gate revenue is expected to increase 26% in the next four years, according to new forecasts by the Ministry of Agriculture and Forestry.
Much of that increase would be driven by dairy returns remaining strong, but in its situation and outlook for New Zealand agriculture and forestry report released yesterday, it was also predicted that meat prices would recover, the exchange rate depreciate and interest rates fall.
The Ministry of Agriculture and Forestry (Maf) forecasts gross farm gate revenue to hit $19 billion this financial year, rising to $24 billion in 2012 with the sector's contribution to gross domestic product (GDP) rising from $8 billion this year to $10.3 billion in 2012 after allowing for internal consumption.
The impact of soaring dairy prices was dramatically illustrated with gross farm gate revenue rising 6.4% in the year to March 31 2008 due to the increase in dairy returns exceeding the fall in meat and wool revenue.
In the year to March 31, export earnings from agriculture and forestry grew 8.4% to $23 billion, helped by the dairy payout which, in inflation-adjusted terms, reached a 43-year high.
Farmer productivity continues to exceed other sectors.
Maf used "multi-factor productivity" to measure how efficiently inputs were used to produce outputs, and concludes productivity in the sector grew 1.8% a year compared to 0.9% a year for the wider economy.
GDP is expected to be boosted 2.3% in 2010 as farmers recover from last summer's drought.
Maf predicts a 3% GDP increase the following year, with exports boosted by a falling exchange rate.
Part of that would also come from the dairy sector, where milk flows were expected to grow at 3% a year having fallen 3.2% last year due to drought.
By 2012 dairy exports were expected to earn New Zealand $12 billion a year from 1.5 billion kg of milk solids, up form $10.4 billion this year from 1.27 billion kg of milk solids.
Despite a positive outlook for sheep meat, Maf said large-scale destocking was under way on sheep farms, due in part to drought in the North Island but also land-use change.
Export volumes of lamb are picked to fall from 326,000 tonnes this year to 287,000 in 2012, but would be worth more, the value expected to rise from $2 billion to $2.6 billion in those four years.
The forest harvest was expected to increase in coming years as the exchange rate eased and demand from China and India grew.
