New Zealand Milk Production Update – Jul ’16
Executive Summary
New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Jun ’16. Highlights from the updated report include:
• New Zealand milk production finished flat on a year-over-year basis during Jun ’16, while production volumes reached seasonal lows.
• ’15-’16 New Zealand Farmgate Milk Price projections remained at a nine year low while the ’16-’17 opening Farmgate Milk Price announced in late May ’16 was set 9.0% above ’15-’16 prices, but below expectations.
• Low Farmgate Milk Prices have contributed to New Zealand cow & heifer slaughter rates reaching a new monthly record high during May ’16. ’15-’16 annual New Zealand slaughter rates finished up 3.2% YOY.
Additional Report Details
According to DCANZ, Jun ’16 New Zealand milk production continued to decline seasonally while finishing flat on a YOY basis. New Zealand milk production typically reaches seasonal lows during the month of June as farmers dry off their herds in preparation for spring calving. June milk production has consisted of less than one percent of annual production levels throughout the past ten years.
Despite warnings of an El Niño event potentially resulting in dry conditions across New Zealand, better than anticipated growing conditions have resulted in only moderate YOY declines in milk production over recent months. ’15-’16 annual New Zealand milk production finished down just 1.9%, significantly less than Fonterra’s Mar ’16 projected annual YOY decline in milk collections of 4.0%.
Timely rainfall was experienced across the majority of New Zealand during the early months of 2016, reducing seasonally higher than average soil moisture deficits experienced in late 2015. Improving weather conditions contributed to YOY declines in New Zealand cow & heifer slaughter rates throughout the first quarter of 2016 however, more recently, slaughter rates increased to a new monthly record high in May ’16, finishing 0.7% above the previous year. ’15-’16 annual slaughter rates finished up 3.2% YOY.
Slaughter rates have accelerated as New Zealand Farmgate Milk Prices continue to trend lower. In early Mar ’16, Fonterra revised its forecasted ’15-’16 Farmgate Milk Price lower by $0.25/kgMS, or 6.0%, to $3.90/kgMS, a nine year low. The current price forecast would be $0.50/kgMS, or 11.4%, below the ’14-’15 pay price and $1.95/kgMS, or 33.3%, below the ten year average price. The Fonterra forecasted ’15-’16 Farmgate Milk Price has been revised a total of $0.70/kgMS lower throughout 2016 as oversupplied global markets have been slow to respond with production cuts, particularly within the EU-28.
Fonterra released a ’16-’17 opening Farmgate Milk Price of $4.25/kgMS during late May ’16, which was an increase of $0.35/kgMS from the current season forecast but lower than general expectations. Producer cashflows will remain under considerable financial pressure into 2017, which could result in continued aggressive culling and pullbacks in production levels.
In addition to lower Farmgate Milk Prices, weaker export demand for New Zealand dairy products has also become a concern for New Zealand dairy producers over recent months. The total value of New Zealand dairy exports finished 9.0% lower on a YOY basis during May ’16, reaching a seven year low for the month of May. The ’15-’16 annual value of dairy exports finished down 9.3% YOY, reaching a six year low.
Despite warnings of an El Niño event potentially resulting in dry conditions across New Zealand, better than anticipated growing conditions have resulted in only moderate YOY declines in milk production over recent months. ’15-’16 annual New Zealand milk production finished down just 1.9%, significantly less than Fonterra’s Mar ’16 projected annual YOY decline in milk collections of 4.0%.
Timely rainfall was experienced across the majority of New Zealand during the early months of 2016, reducing seasonally higher than average soil moisture deficits experienced in late 2015. Improving weather conditions contributed to YOY declines in New Zealand cow & heifer slaughter rates throughout the first quarter of 2016 however, more recently, slaughter rates increased to a new monthly record high in May ’16, finishing 0.7% above the previous year. ’15-’16 annual slaughter rates finished up 3.2% YOY.
Slaughter rates have accelerated as New Zealand Farmgate Milk Prices continue to trend lower. In early Mar ’16, Fonterra revised its forecasted ’15-’16 Farmgate Milk Price lower by $0.25/kgMS, or 6.0%, to $3.90/kgMS, a nine year low. The current price forecast would be $0.50/kgMS, or 11.4%, below the ’14-’15 pay price and $1.95/kgMS, or 33.3%, below the ten year average price. The Fonterra forecasted ’15-’16 Farmgate Milk Price has been revised a total of $0.70/kgMS lower throughout 2016 as oversupplied global markets have been slow to respond with production cuts, particularly within the EU-28.
Fonterra released a ’16-’17 opening Farmgate Milk Price of $4.25/kgMS during late May ’16, which was an increase of $0.35/kgMS from the current season forecast but lower than general expectations. Producer cashflows will remain under considerable financial pressure into 2017, which could result in continued aggressive culling and pullbacks in production levels.
In addition to lower Farmgate Milk Prices, weaker export demand for New Zealand dairy products has also become a concern for New Zealand dairy producers over recent months. The total value of New Zealand dairy exports finished 9.0% lower on a YOY basis during May ’16, reaching a seven year low for the month of May. The ’15-’16 annual value of dairy exports finished down 9.3% YOY, reaching a six year low.