Strong global growth tipped to lift farming

Farmers facing tougher economic times this year can look forward to a more positive future, says rural financier Rabobank.

Its annual "Agriculture in Focus" report says the strength of the global economy has mitigated the impact from the high dollar, rising interest rates and increased costs, particularly in dairy, beef and lamb.

The global economy is forecast to grow by 4.3 per cent, well above the 3.6 per cent long-term average.

Ben Russell, head of Rabobank food and agribusiness research division, said relative stability in the United States and Japan coupled with expansion of the Chinese economy had underpinned global economic strength.

"The strength of the global economy and the strength in New Zealand's main trading partners are critical to maintaining good demand for food and rural commodities," Russell said.

Janet Skilton, Rabobank marketing manager New Zealand, said although the indicators in main markets were positive for most commodities, farmers were still facing relatively high exchange and interest rates.

"I think over the course of the year we are looking at both of them falling, which is going to have benefits in 2007," she said.

Farmers were generally having a good season with reasonable rainfall. Lambing percentages were helping to counter a fall in price per head for sheep meat producers.

Meat and Wool New Zealand said the sheep meat price had fallen 17 per cent this year to its lowest level this century.

But while the price of sheep meat fell, wool prices surged by as much as 30 per cent in the past five weeks, particularly for medium and fine grades.

"It's gone from doom and gloom to suddenly there's a lot of happy farmers in the South Island," Skilton said.

Strong retail sales during the European winter, low prices and declining inventories resulted in good interest from European buyers in the first two months of the year.

China, which Skilton said had been practically out of the market, was also "testing the water again".