International commodity prices will be stronger over the next four years, Ministry of Agriculture and Forestry economists say.
"We expect positive outlooks for New Zealand agriculture and forestry prices and incomes," MAF director-general Murray Sherwin said today.
MAF forecasts dairy payouts of between $5 and $5.50 per kilogramof milk solids for the next four dairy seasons.
This is based on the expectation that international dairy prices will remain higher than prices in recent years but not as high as prices at June 2007.
MAF said farm-gate prices for beef were stronger this year and had benefited from strong returns in South Korea and Japan.
Although international prices for New Zealand beef were expected to soften over the four years, farmgate returns to farmers would improve as the New Zealand dollar exchange rate dropped.
International prices for major horticulture crops had generally been strong enough to alleviate the effect of the high exchange rate, and the focus on maintaining and improving product quality was expected to sustain international prices.
Log prices had risen in recent months, in what was expected to be the beginning of a sustained rise in log prices. But the report said several timber mills had closed in recent months, caught in the combined effects of the high exchange rate, a weak US timber market, and rising log prices.
"Recovery is expected to be slow, with the US housing market likely to remain depressed for some time," MAF said.
Sheep farmers were also suffering, after a second slaughter season of poor lamb schedule prices due to static international prices and a high exchange rate.
But MAF predicted the outlook for lamb might improve as the number of breeding ewes declined in Europe.
