Executive Summary

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

• New Zealand milk production volumes declined 5.0% on a YOY basis throughout Dec ’21, reaching a nine year low seasonal level. The YOY decline in New Zealand milk production volumes was the fifth experienced in a row and the largest experienced throughout the past two and a half years.
• Fonterra’s ’21-’22 farmgate milk price forecast of $8.40-$9.00/kgMS is currently 15.4% 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 12.4% on a YOY basis throughout Nov ’21 when normalizing for slaughter days, reaching a three year low seasonal level.

Additional Report Details

Milk Production

According to Dairy Companies Association of New Zealand (DCANZ), Dec ’21 New Zealand milk production volumes declined seasonally to a four month low level while finishing 5.0% below previous year levels. New Zealand milk production volumes reached a nine year low seasonal level for the month of December. On a milk-solids basis, production declined 5.5% YOY, reaching a four year low seasonal level.

The Dec ’21 YOY decline in New Zealand milk production volumes was the fifth experienced in a row and the largest experienced throughout the past two and a half years. 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 five 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 3.3% on a YOY basis throughout the first seven months of the production season, however, and are pace to reach a four year low level.

Rainfall & Soil Moisture Deficits

New Zealand rainfall levels rebounded to a 17 year high seasonal level throughout Dec ’21 when regionally weighted by milk production volumes. Rainfall levels finished 88.0% above previous year levels and 45.6% above 20 year average seasonal levels for the month of December. Rainfall levels throughout the North Island of New Zealand reached a three year high seasonal level while rainfall levels experienced throughout the South Island of New Zealand reached a 17 year high seasonal level.

Excessive rainfall levels contributed to New Zealand soil moisture deficits remaining below previous year levels for the 11^th time in the past 12 months throughout Dec ’21 when regionally weighted by milk production volumes. Soil moisture deficits finished 16.8% below previous year levels and 19.1% below 20 year average seasonal levels for the month of December, reaching a three year low seasonal level.

The cold, wet spring weather has contributed to the recent declines in New Zealand milk production volumes. According to the USDA, producers are hopeful that current soil moisture may carry pastures further into the Southern Hemisphere summer months.

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 $8.40-$9.00/kgMS in early Dec ’21, up $0.30/kgMS, or 3.6%, at the midpoint of the forecast. The midpoint of the ’21-’22 farmgate milk price forecast is currently 15.4% above previous year levels and is on pace to reach a record high level.

Cow & Heifer Slaughter

New Zealand cow & heifer slaughter rates declined 12.4% on a YOY basis throughout Nov ’21 when normalizing for slaughter days, reaching a three year low seasonal level. The YOY decline in New Zealand cow & heifer rates was the first experienced throughout the past four months and the largest experienced throughout the past two and a half years on a percentage basis. Nov ’21 dairy cow & heifer slaughter, which has more limited historical data available, finished 23.0% 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 increased by an additional 1.4% throughout the first half of the production season and are on pace to reach a record high annual level, despite the most recent decline.

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.