Executive Summary

New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Aug ’21. Highlights from the updated report include:

• New Zealand milk production volumes declined 4.8% on a YOY basis throughout Aug ’21, finishing below previous year levels for the first time in the past nine months but remaining at the second highest seasonal level on record.
• Fonterra’s ’21-’22 farmgate milk price forecast of $7.25-$8.75/kgMS is currently 6.1% above the seven year high level experienced throughout the previous season at the midpoint of the forecast, although the wide range reflects a number of major risks.
• New Zealand cow & heifer slaughter rates increased 25.0% on a YOY basis during Aug ’21 when normalizing for slaughter days, reaching a six year high seasonal level.

Additional Report Details

Milk Production

According to Dairy Companies Association of New Zealand (DCANZ), Aug ’21 New Zealand milk production volumes rebounded to a four month high seasonal level but finished 4.8% below previous year levels. Despite declining on a YOY basis, New Zealand milk production volumes remained at the second highest seasonal level on record for the month of August. On a milk-solids basis, production declined 4.2% YOY but also remained at the second highest seasonal level on record.

The Aug ’21 YOY decline in New Zealand milk production volumes was the first experienced throughout the past nine months. ‘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 2.4% on a YOY basis throughout the first quarter of the production season, however.

Rainfall & Soil Moisture Deficits

New Zealand rainfall remained slightly above long-term historical seasonal levels throughout Aug ’21. Rainfall levels finished 16.2% above previous year levels and 7.9% above 20 year average seasonal levels for the month of August. Rainfall levels reached an 11 year seasonal high level throughout the South Island of New Zealand but finished below previous year levels throughout the North Island. Total New Zealand rainfall levels have finished 2.3% higher on a YOY basis throughout the first quarter of the ’21-’22 production season.

New Zealand soil moisture deficits remained below previous year levels for the eighth consecutive month throughout Aug ’21. New Zealand soil moisture deficits reached a three year low level, overall, and a four year low seasonal level for the month of August.

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 reaffirmed the opening ’21-’22 farmgate milk price forecast of $7.25-$8.75/kgMS, although the wide range continues to reflect major risks including the impact of governments winding back their economic stimulus packages, foreign exchange volatility, changes in global supply and demand patterns at current high price levels, and geopolitical issues. The midpoint of the ’21-’22 farmgate milk price forecast is currently 6.1% above previous year levels.

Cow & Heifer Slaughter

New Zealand cow & heifer slaughter rates increased 25.0% on a YOY basis during Aug ’21 when normalizing for slaughter days, reaching a six year high seasonal level. The YOY increase in New Zealand cow & heifer slaughter rates was the first experienced throughout the past four months and the largest experienced throughout the past 19 months on a percentage basis. Aug ’21 dairy cow & heifer slaughter, which has more limited historical data available, increased on a YOY basis for the first time in the past three months, finishing 19.2% above 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 increased by an additional 3.7% throughout the first quarter of the production season.

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 1.5% on a YOY basis throughout 2021, reaching a ten year low level.