The Ministry for Primary Industries' forecast for primary sector exports has fallen by $265 million, partly driven by the weakening of global dairy markets.
Primary sector exports are forecast to fall. Photo: RNZ / Rebekah Parsons-King
Its December Situation and Outlook Report is forecasting all primary sector exports to increase in value by nine percent in the year ending June 2018 to just over $41 billion dollars.
However, this is less than what the ministry was forecasting three months ago when dairy prices were stronger.
The fall in the New Zealand Dollar since August has cushioned the fall in earnings.
In the past three months whole milk powder prices on the global dairy trade auction have dropped ten percent.
The Minister for Agriculture, Damien O'Connor, says higher value dairy products are propping up lower value dairy exports.
"Infant formula and butter have been the main drivers of increasing income across the dairy sector ... skim milk is still a bit of a challenge and whole milk powder is not rising in the way we'd like.
"We have to get out and diversify the opportunities in dairy so we can, off the back of infant formula and butter, grow more value from what we do."
The report shows a more positive outlook for red meat and other primary sector products such as seafood, forestry and honey.
But Mr O'Connor said the outlook for wool exports is still disappointing.
"Wool in particular is a huge lost opportunity. We'll be focussing on ways to bring some co-ordination across the wool sector.
"It's just a waste at the moment and we've got to do better."
Overall the primary sector is in good shape, but there are some challenges across all sectors, he said.
"What we have to do is one by one work through those, make sure they know where they're heading, they've got a clear vision for the future, and make sure we put in place all the infrastructure, all the training, and the incentives - to get to the right place."
He said the whole primary sector needs to accelerate its transition from commodity exports to higher value production.