How quickly things can change. Lamb is back in vogue and questions are being asked about the performance of the dairy industry. But, as agribusiness editor Neal Wallace reports, while farming fortunes have altered, major questions remain about the direction the two industries are taking.
A Year ago, it seemed every sheep farmer that could wanted to quit their flocks, borrow several million dollars and milk cows.
Today, the curse of the primary sector - boom and bust cycles - has seen prime lamb prices increase 38% in just one year, bringing sheep back in vogue, while some heavily indebted new dairy farmers are trawling through their budgets to cut costs and adjust to a forecast milk payout more than a third lower than last year.
The disparate fortunes of lamb and dairying highlight a serious flaw with with the rural sector, a lack of stable product prices.
Last spring, Meat and Wool New Zealand expected between 250 and 300 sheep, beef and deer farms would convert to dairying, but now believes that figure to be closer to 150.
The reality is that number should fall further as the dairy industry, while still expecting one of its highest payouts on record, is wracked by so much uncertainty that many think Fonterra's final payout for this season would be even lower than the latest forecast of $5.10 a kg of milksolids.
But, the sudden 12-month turnaround in fortunes highlights how farm incomes lurch from one extreme to another, exacerbating farmer patience and making budgeting all but impossible.
Dairy farmers received $7.90 a kg milk solids last year and are forecast to receive $5.10 this year, while sheep farmers have seen the average payment for prime lambs grow from $58 last year, providing the lowest incomes in 50 years, to a far more healthier $80 this season.
While dairy incomes reached uncharted heights last year, sheep farming incomes plummeted to 50-year lows.
Meat and Wool New Zealand Economic Service said the average profit before tax last year was a miserly $16,700. It was expected to increase to a more respectable - but still low - $45,600 this year.
Farm input costs were eroding some of those gains, growing at 6.9% a year.
Sheep farmers still see room for their returns to improve and are conscious the higher returns have everything to do with short supply and strong demand and nothing to do with structural improvements to the industry.
In fact, many fear the improved returns could see last year's momentum to change the structure of the meat industry put to one side.
Alliance Group chief executive Grant Cuff said there was nothing in the immediate future to suggest lamb prices would fall this season, as reduced global supply more than offset weaker demand from lower incomes caused by the global financial crisis.
"At the moment, we are still holding to our earlier forecasts. The volume decline is more than enough to offset any decline in demand, so we don't see any reason for a material price reduction as the year continues."
This rollercoaster income ride has a huge impact on the economy.
At $5.10 a kg milk solids, the income of Fonterra's' suppliers will be $2.4 billion lower this year than last, while at current meat prices, sheep farmer incomes will be up by about $500 million over the same period.
The lower dairy payout will have wider implications, as many sheep farmers try to boost their incomes by supporting the dairy industry through the sale of grass or baleage and taking on winter grazing.
Those growing winter crops say they need $30 a cow a week to cover their costs, but as dairy farmers start looking at their costs, pressure is likely to come on what they would pay.
Why the reversal?
In part the higher lamb price has little to do with anything positive done by the meat industry.
World wide, sheep numbers have fallen, leading to a shortage of lamb in particular, with New Zealand lamb numbers forecast to be down 23% on last year due to land use change and drought.
The UK ewe flock fell up to 7% last year and was expected to contract by a similar amount next year, due to low returns.
The Australian flock was rebuilding after several years of drought which delayed the flow of meat on to the market, but Meat and Livestock Australia expected tonnage to build over the next few years.
It expected lamb production to grow 4.4% this year with exports to its main market in the United States to increase 11%.
Dairy prices which soared to record highs, have been hit hard by the global recession and buyer resistance, prompting them to tumble just as quickly, especially in developing Asian markets.
Higher prices have seen milk production increase sharply in North and South America.
New Zealand's primary industries have been grappling with ways to smooth the cyclical extremes for decades.
The dairy industry has adopted a centralised selling strategy, a strategy the meat industry has admired and debated but so far been unable to unite and adopt.
But Fonterra's experience with falling returns this year showed that having control of 90% of the dairy sector's exports did not mean it dominated or dictated terms to the market.
Last year's debate by farmers and the meat industry on the future of the meat industry assumed that an entity controlling the majority of meat exports could control the market. Fonterra's experience this season would suggest otherwise.
Both have seen the need to differentiate commodity and higher value products and to sell the New Zealand story, but in reality, there has been limited success when compared to merino wool clothing such as Ice Breaker.
A farmer recently returned from Europe told the Otago Daily Times how promotion of New Zealand lamb could be improved when he compared identical New Zealand and Irish lamb racks in an Austrian supermarket.
The New Zealand product sold for 19 ($NZ49.30) a kg and the Surrey Valley branded Irish lamb, complete with promotional material selling the attributes of where the lamb came from, retailed for 34 a kg.
Fonterra has abandoned costly plans of expanding its branded fresh milk product range internationally, in favour of adding value to its existing product range by working with customers and improving the quality and uses of those products.
It also has a strategy of growing its global footprint through global sourcing of product from other countries which it moves through its supply chain.
That product range would be either finished dairy products or, if it can control the source and manufacturing of the milk, fresh milk products.
Fonterra does this in Australia, North America and South America with profits going back to its New Zealand shareholders and suppliers.
But it still largely relied heavily on sales of commodity milk powder, cheese and butter.
Meat companies were accentuating the health and free-range attributes of New Zealand lamb, while also encouraging production through contracted supply and moving towards rewarding for carcass yield.
But no-one could say how long the recovery in the fortunes of sheep farmers would last.
It would take time for farmers to rebuild flocks but such was the lack of confidence last year, many observers felt they might opt for dairy support or crops.
The decisions of others might also influence what sheep farmers did, such as the European Union's decision to reintroduce subsidies for dairy exports, which was expected to dampen prospects for New Zealand dairy exports. Other countries could adopt similar policies to support their farmers through the economic upheaval.
Alliance Group's Grant Cuff said the meat industry could not afford to relax because prices were stronger than they had been.
He said the quality of the product had to continue to improve from the farm, through processing and in the market so consumers were not disappointed, and there could be no relaxation of product promotion.
"It has to continue. People should not sit on their hands and say: `There is an upswing so we do not have to worry'."
Mr Cuff tempered his enthusiasm with knowledge that the meat industry had been there before, that boom times had been followed by price collapses.
For the good of New Zealand, all export sectors needed to perform.
Unfortunately, given the track record of our key primary industries, there was nothing to suggest the boom and bust cycle had been broken.
