Farmers on a stronger footing as they head to Mystery Creek

Better prices are likely to mean a happier time for farmers as they head to Fieldays this week. Picture / Alan Gibson

Farmers are more likely to have a spring in their step at this week's Fieldays agricultural event at Mystery Creek thanks to price improvements across a broad range of primary industries.

Economists said recent data which showed the country's merchandise terms of trade rose 5.1 per cent in the March 2017 quarter (to its highest point since 1973) highlighted a significant step up in commodity exports.

The terms of trade - a measure of the purchasing power of New Zealand's exports - have been trending higher since 2000.

This year's four-day event at Mystery Creek, near Hamilton, is likely to be a more cheery affair compared to this time last year, when farmers were looking at the real possibility of dairy prices remaining well below break-even for three consecutive years.

Fonterra last month increased its forecast for the current season just ended to $6.15 per kg of milksolids from $6.00 - and a world away from the initial forecast of just $4.25/kg.

In addition, Fonterra's opening forecast for 2017/18 of $6.50/kg was above most analysts' expectations.

In the meat trade, lamb is trading at over $6.00 a kg and current prices are at their second highest for a June month since 2011. Beef prices are similarly strong.

Outside the top three, horticulture and viticulture have also been strong while forestry is enjoying its best returns in 20 years.

The odd man out is wool, with some grades hitting their lowest level in more than seven years at last week's auction.

Economists said dairy farmers had good cause for optimism at this week's Fieldays, but would nevertheless remain cautious with their chequebooks.

"It's certainly going to be a bit of a shift from the last season, obviously with the milk price being much more favourable," Rabobank dairy analyst Emma Higgins said.

"Those pricing signals released by pretty much all the major milk processors will set the tone," she said.

In terms of themes, water quality is likely to be high on the agenda, along with land use alternatives.

Technology is also likely to be a key platform. "The pace of change is incredible," Higgins she said. "Drones are just a part of that now and the technology is getting incredibly sophisticated and is moving more rapidly," she said.

ASB rural economist Nathan Penny said he expected farmers, dairy farmers in particular, to be more relaxed this year.

Even so, the two sub-par seasons have done some damage to dairy farm balance sheets, and Fonterra will soon claim back the $400 million or so in soft loans that it dished out to keep farmers afloat during the slump.

"They won't necessarily have their wallets out, but they will be enjoying themselves," he said.

Penny expected alternative land uses, water quality and technology to be key themes at this week's event.

Federated Farmers said the upgraded forecasts mean average dairy farm in the country will be around $23,000 dollars better off, but DairyNZ said it may take three or four seasons of good milk prices for farmers to recover financially.

While the outlook for dairy has improved, reports about New Zealand's poor record for maintaining water quality are starting to mount up.

Secretary for the Environment Vicky Robertson, commenting on an official report in April, said land use had "clearly affected" the state of fresh water in this country.

"This report confirms our urban waterways are the most polluted but we are seeing more declining trends in pastoral areas and it's important we do something about it now and continue to track any progress," she said then.

Fieldays is likely to feature several innovative ways to deal with nitrogen run-off and companies are already lining up products and services to tackle the problem.

Among them, herd development company CRV Ambreed is competing in the Fieldays Innovation Awards for its genetic discovery, which it says could reduce nitrogen leaching on New Zealand farms by 20 per cent within 20 years.

Despite last year's dismal dairy prices, the event attracted 130,684 visitors over the four days, just shy of the record attendance in 2006.