However, dairy farmers will have to contend with a lot more than those two bright points this year and some of those things will have long-term consequences for the industry and the economy.
The good start has been reflected by dairy commentators holding or even increasing their farmgate milk price predictions. They had predicted dairy commodity prices to start improving this year but the pace and angle of the rise are better than expected.
On top of that feed is generally plentiful, setting up farmers well for autumn and winter, and letting them keep the milk flowing as we approach the tail end of the season.
Fuel prices have come down, inflation is low at just under 2% a year and interest rates are also low and likely to stay that way this year. The Reserve Bank is likely to hold the official cash rate all year.
However, there is some upward pressure on inputs, notably on wages.
And with a labour shortage farmers will have to respond if they want to attract and keep staff.
Many dairy farmers will have ample feed stored going into winter meaning there should be plenty on the market for those who need to buy, making prices attractive – good for the buyers but not so good for the arable farmers selling it.
Domestic demand is predicted to pick up this year after softening last year. Household spending is likely to grow at 5% for the next two years.
Business confidence is a tricky one to decipher. It’s a case of picking which of the many surveys you like.
Many businesses seem to be doing one and saying another. While expressing a lack of confidence they are investing and hiring more staff.
It looks very much like a case of expressing the party line of pessimism because we have a Labour-led government while acting optimistically when making business decisions.
Farmers will also be worrying about the consequences for them of political moves on water quality, the environment generally and climate change.
There will be much jockeying for position this year as various interested groups try to influence Government thinking on all these issues so farmers need to make sure they are heard and can quantify their claims about what they are doing for the environment.
While there are likely to be some decisions made this year there are unlikely to be major financial impacts from them. Politicians don’t generally move that fast unless they are claiming credit for something everyone likes.
Overseas influences are likely to have a big effect on farm incomes this year but the exchange rate, barring dramatic events causing a sharp rise, is expected to be reasonably stable.
The big unknowns of the year are international events.
We don’t even know what Brexit will look like so trying to predict how it will affect us is fraught with difficulty.
In the past few years New Zealand hasn’t filled its European import quotas for lamb or dairy products at zero tariffs, indicating we have more important markets.
One of those important markets is China. Its trade war with the United States could be quickly resolved or escalate. Either way is not good news for New Zealand exporters.
A resolution will likely involve China taking more goods from America and an escalation could further depress domestic spending in China.
China’s downturn in domestic spending is allied with big cuts in both its imports and exports and though it has been more actively buying dairy products recently some commentators say it has now filled its immediate needs.
A bright spot on the international scene is that the European Union has managed to sell all but a small amount of its stockpiled skim milk powder without causing chaos in the market.
The net result of the domestic and overseas factors this year could be a squeeze on margins as costs at home push up and international uncertainty and tensions coupled with the Chinese downturn put downward pressure on prices.
