Dairy production has been affected by dry conditions. Photo
by the New Zealand Herald.
Dry weather conditions will take their toll on the rural
economy and economists are expressing concerns about their
impact on GDP.
The dry summer, particularly in the North Island, has been
hurting dairy production.
Overall, Westpac economist Nathan Penny expected agricultural
production to make a below-average contribution to growth
Weather developments were being watched ''nervously'' and, at
this stage, it appeared the dry weather would have a negative
effect on GDP over 2013, he said.
He estimated dairy production in the South Island, which was
faring better than the North Island, would be up about 10%,
compared with last season.
While the dry conditions were not as severe as in the North
Island, better access to irrigation, particularly in
Canterbury, and dairy farm conversions were also contributing
to strong production growth.
ASB economist Nick Tuffley said lower dairy production would
have a direct impact on first-quarter GDP.
From an income perspective, reduced production would be
particularly disappointing, as farmers were unable to benefit
from the pick-up in dairy and meat prices over the past six
The impact of lower revenue would be further compounded by
higher production costs, as dry weather would have boosted
That would have a lasting effect on the economy, as reduced
profits would result in farmers scaling back investment next
season, Mr Tuffley said.
The ANZ commodity price index increased 1% in February,
representing the seventh consecutive monthly rise in the
Prices have increased 9% since the most recent low recorded
in July last year, but remained 13% below the high measured
for the index in April 2011.
Butter recorded the greatest individual lift, increasing 4%
from the previous month. Wool and beef prices both dropped 2%
in February, to four and three-month lows, respectively.