New Zealand is poised to set records in both milk production and powder exports, helped by herd expansion and Chinese consumers' thirst for foreign dairy products.

The country, the world's biggest dairy exporter, will raise its production of liquid milk by 400,000 tonnes to 17.0m tonnes in 2009-10, a briefing by US officials in Wellington said.

That will enable a rise in production of whole milk powder, of which 810,000 tonnes will be exported in the year – a 22% jump.

'Strong start' 

The rosy forecast follows a "strong start" to New Zealand's milk year, which began in June, with whole milk powder exports running 65,000 tonnes ahead during the first three months, the report said.

Purchases of whole milk powder jumped by 75%, helping China overtake Japan to become the second-bigger buyer after America of Kiwi dairy products.

Overall, New Zealand's dairy exports rose 6.8% by volume last year, while falling to $6.2bn by value.

Good weather

The rise in New Zealand's milk production will be fostered by a rise of 105,000 in the size of its milking-cow herd, as the last farms to switch to dairy, since a moratorium was lifted at the start of the decade, come on line.

"The spring has been exceptional for pasture growth," making up for a 25-30% drop in fertilizer use, the briefing said.

On New Zealand's South Island, milk production at the end of last month was reportedly running 8% higher year on year "reflecting both good pasture growth and cow condition".

Longer-term, the size of the national herd could rise from 4.37m as of the end of May to more than 5m over the next 10-15 years, with profitability, climate change policy and water availability major factors likely to put a cap on animal numbers.