Executive Summary

New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Mar ’22. Highlights from the updated report include:

• New Zealand milk production volumes declined 1.9% on a YOY basis throughout Mar ’22, remaining below previous year levels for the eighth consecutive month.
• Fonterra’s ’21-’22 farmgate milk price forecast of $9.30-$9.90/kgMS is currently 27.3% above the seven year high level experienced throughout the previous season at the midpoint of the forecast and is on pace to reach a record high level.
• New Zealand cow & heifer slaughter rates declined 6.9% on a YOY basis throughout Feb ’22 when normalizing for slaughter days, reaching a four year low seasonal level.

Additional Report Details

Milk Production

According to Dairy Companies Association of New Zealand (DCANZ), Mar ’22 New Zealand milk production volumes declined seasonally to a seven month low level while finishing 1.9% below previous year levels. On a milk-solids basis, production finished 1.5% below previous year levels.

The Mar ’22 YOY decline in New Zealand milk production volumes was the eighth experienced in a row but the second smallest experienced throughout the eight month period on a percentage basis. On an absolute basis, the Mar ’22 YOY decline in New Zealand milk production volumes was the smallest experienced throughout the past eight months. New Zealand milk production volumes had finished above previous year levels over eight consecutive months through Jul ’21, prior to declining on a YOY basis over the eight most recent months of available data.

‘20-’21 annual New Zealand milk production volumes increased by 3.0% on a YOY basis, reaching a record high annual level. The 3.0% annual growth rate was the largest experienced throughout the past seven years. ‘21-’22 YTD New Zealand milk production volumes have declined by 4.1% on a YOY basis throughout the first ten months of the production season, however, and are pace to reach a four year low level.

Rainfall & Soil Moisture Deficits

New Zealand rainfall levels have been highly volatile throughout the first quarter of 2022 when regionally weighted by milk production volumes. Rainfall levels declined to a 25 year low seasonal level throughout Jan ’22, prior to rebounding to an 18 year high seasonal level throughout the month of February. Mar ’22 rainfall levels finished closer to historical average seasonal levels, down 22.8% YOY but finishing just 12.2% below the 20 year average seasonal level for the month of March.

Mar ’22 New Zealand soil moisture deficits increased from the previous month when regionally weighted by milk production volumes but remained below historical average seasonal levels. Soil moisture deficits finished 19.5% below previous year levels and 8.1% below 20 year average seasonal levels for the month of March, remaining at a four year low seasonal level for the second consecutive month.

In addition to highly volatile weather conditions experienced throughout the first quarter of 2022, local sources indicate that there is a shortage of 4,000 to 6,000 dairy workers throughout New Zealand, contributing to the challenging production environment.

Farmgate Milk Prices

Fonterra’s final ’20-’21 farmgate milk price of $7.54/kgMS reached a seven year high level on strong Chinese and Southeast Asian powder demand. Fonterra raised their ’21-’22 farmgate milk price forecast to a value of $9.30-$9.90/kgMS in late Feb ’22, up $0.40/kgMS, or 4.3%, at the midpoint of the forecast. The midpoint of the ’21-’22 farmgate milk price forecast is currently 27.3% above previous year levels and is on pace to reach a record high level.

Cow & Heifer Slaughter

New Zealand cow & heifer slaughter rates declined 6.9% on a YOY basis throughout Feb ’22 when normalizing for slaughter days, reaching a four year low seasonal level. The YOY decline in New Zealand cow & heifer slaughter rates was the fourth experienced in a row. Feb ’22 dairy cow & heifer slaughter, which has more limited historical data available, finished 9.2% below previous year levels.

’20-’21 annual New Zealand cow & heifer slaughter finished 4.0% above the previous year, reaching a five year high level and the third highest annual figure on record. ’21-’22 YTD New Zealand cow & heifer slaughter rates have declined by 1.4% throughout the first three quarters of the production season, however.

New Zealand milk production volumes increased at a compound annual growth rate of 4.2% over the ten year period ending during the ’14-’15 record production season but growth has moderated over more recent years as farmgate milk prices declined from the ’13-’14 record high levels and the New Zealand milk cow herd was reduced. USDA is projecting the New Zealand milk cow herd will decline 0.5% on a YOY basis throughout the 2022 calendar year, reaching a five year low level.