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Bigger payout for dairy suppliers despite gloom

By Hugh Stringleman

Friday 30th May 2003

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Amid the gloom of falling farm and orchard earnings, dairyfarmers will be pleased to learn that the basic milk price is expected to improve 20c to $3.80/kg milksolids for the new dairy season, which starts on Sunday.

The latest situation update from the policy division of the Ministry of Agriculture and Forestry references Fonterra Co-operative Group for the $3.80 figure.

It is at the high end of Fonterra's own public forecast, but represents a modest improvement in world dairy product prices and minimal damage from further appreciations in the New Zealand dollar value.

The update also contains a bold prediction that the milk price will recover to $5/kg by the end of the five-year forecast period.

The bulk of the Maf update contains little joy for producers, exporters or the government in the short term.

Given that the New Zealand dollar is expected to rise until March next year, export earnings and agriculture's contribution to GDP will continue to fall.

Pastoral exports have already fallen 13% in the year ended March 2003, with a further 8% to come in the present financial year, Maf said. However, the aggregate value of pastoral exports, at about $12.2 billion for the year ended March 2003, was a return to the revenue of 2000/01, which rose an impressive 30% on the year before.

MAF predicts that pastoral exports will remain in the range of $11 to $13 billion in the short term, a considerable improvement on the range in the 1990s decade.

Horticultural exports are predicted to fall 5% this year to $2 billion but then rise steadily to $2.8 billion in 2007/08.

Likewise forestry sector exports were $3.7 billion for the year ended March 2003, and expected to improve 23% in the five-year forecast period.

The contribution to GDP from agriculture for the year ended March 2003 was estimated to have fallen 15% to $8 billion, and it will rise again by only 10% in the coming five years. Cold weather and drought took a toll during the past growing season.

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