Dairy

High dairy prices helped push the country's terms of trade measure up in the three months ended March, with economists now predicting the measure will spike 7% in the June quarter.

Though the widespread drought has caused milk production to plummet and resulted in a record sheep and beef kill, economists have signalled the net cost to the economy could be ''close to zero'' - thanks to global dairy price increases.

Dairy prices continued to accelerate in the latest GlobalDairyTrade auction, as dry conditions in the North Island squeeze milk production.

Moves by Fonterra and the Ministry of Primary Industries following the agrichemical scare appear to have largely assured markets that New Zealand dairy products are safe, Westpac economist Nathan Penny says.

Dairy prices have continued a good start to the year, increasing 1.1% on a trade-weighted basis in the GlobalDairyTrade auction this week.

Dairy exports lifted strongly in November but that was not enough to stop a further deterioration in New Zealand's merchandise trade figures.

New Zealand dairy exports to China for the 10 months to October have virtually matched full-year 2011 exports, with two months still to go.

New Zealand's milk production leaped 11.3% last season, going down as the most productive on record.

An increase in global dairy prices has been the catalyst for a turnaround in the ANZ commodity price index.

Westland Milk Products believes Fonterra's acquisition of New Zealand Dairies Ltd's factory at Studholme would have "far-reaching implications" for the wider New Zealand dairy industry.