High market prices for kiwifruit are expected to offset the effects of a drop in export volumes caused by the disease Psa-V, according to the Ministry for Primary Industries.

Horticultural exports are on track to reach $3.5 billion in export earnings in the year to March 2013, with higher in-market prices expected to offset lower volumes of kiwifruit and wine, the ministry says in its half-year update to the annual Situation and Outlook for Primary Industries report.

But deteriorating global economic conditions are having a significant impact on returns across the board for New Zealand's primary products.

The update shows there has been strong pastoral production so far in the 2012/13 season.

"This is partly due to favourable climatic conditions during the previous season which left breeding stock in good condition, and also on-going expansion of the dairy herd," says Chris Jones, the Manager of Economic Information and Analysis for MPI Sector Policy.

MPI reports the continuing economic slowdown, particularly in the traditional markets of the European Union, is causing weaker demand for some New Zealand products such as lamb.

The strengthening of the New Zealand dollar against most major trading currencies in recent months is having a dampening effect on farm-gate returns for primary produce.

As a result, total primary sector export revenue for the year to June 2013 is forecast to be around $27.5 billion, down 5 per cent on the previous year's income ($29.2 billion).

Horticultural exports are on track to reach $3.5 billion in export earnings in the year to March 2013, with higher in-market prices expected to offset lower volumes of kiwifruit and wine.

The bacterial vine-killing disease Psa-V has spread to nearly all kiwifruit growing regions, and will adversely impact gold kiwifruit exports in the year to March 2014.