Drought in much of the country is helping to drive dairy prices higher, but farmgate prices for beef and sheepmeat are weakening as farmers send more stock the works.

The National Institute of Water and Atmospheric Research's (NIWA) latest climate update said soil moisture levels remain much drier than normal for this time of year for nearly the whole of the island.

Sizeable areas of severely drier-than-normal soil moisture persist in the Waikato, southern Taranaki, Wellington, Wairarapa, Hawke's Bay, Gisborne, Bay of Plenty, Auckland and Northland regions.

For the South Island, soil moisture levels remain much drier than normal for this time of year for most locations along the east coast as well as southern portions of Southland, it said.


Severely drier-than-normal soil moisture levels for this time of year remain in parts of drought declared regions of the Otago, Canterbury, and Marlborough regions.

Other dry spots include the far northern West Coast, northern Tasman and Nelson region.

Conversely, wetter than normal soils for this time of year are present for coastal areas of northern Southland, the agency said.

Rabobank, in its latest commodity outlook, said mounting concerns about lower milk flows from the New Zealand - the world's biggest dairy exporter - had been the main catalyst for firmer prices but the rural lending specialist said a major recovery was still a few months away.

Supply was still readily available in most parts of New Zealand, but production growth was slowing.

At the same time, demand from China was subdued.

Rabobank said milk flows have fallen sharply in most parts of New Zealand, as supplementary feed had become uneconomic relative to the low price of milk.

In beef, farmgate prices were continuing to weaken in the face of dry conditions, with further softening likely for the remainder of February and March.

However, prices are still 30 per cent higher than this time last year, the bank said.

New Zealand beef exports totaled 401,916 tonnes in 2014, up 9 per cent from 2013 and a 12 per cent rise compared to the five-year average.

Continued tight supply in the United States supported a 19 per cent increase in New Zealand exports to the US in 2014, with shipments accounting for 51 per cent of total New Zealand beef exports.

In sheepmeat, farmgate prices declined sharply moving into 2015, as dry conditions forced producers to send stock to processors, and slaughter volumes rose significantly January and into February.

The average priced for South Island lambs is 9 pet cent lower, year-on-year.

Sheepmeat exports to China increased by 12 per cent or 15,000 tonnes for 2014 but declined in the lucrative high-value European markets in 2014.