Executive Summary

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

• New Zealand milk production volumes declined 6.1% on a YOY basis throughout Jan ’22, reaching a four year low seasonal level. The YOY decline in New Zealand milk production volumes was the sixth 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 $8.90-$9.50/kgMS is currently 22.0% 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 10.6% on a YOY basis throughout Dec ’21 when normalizing for slaughter days, remaining at a three year low seasonal level.

Additional Report Details

Milk Production

According to Dairy Companies Association of New Zealand (DCANZ), Jan ’22 New Zealand milk production volumes declined seasonally to a five month low level while finishing 6.1% below previous year levels. New Zealand milk production volumes reached a four year low seasonal level for the month of January. On a milk-solids basis, production also declined 6.1% YOY, reaching a four year low seasonal level.

The Jan ’22 YOY decline in New Zealand milk production volumes was the sixth 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 six 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 3.8% on a YOY basis throughout the first two thirds of the production season, however, and are pace to reach a four year low level.

Rainfall & Soil Moisture Deficits

New Zealand rainfall levels declined to a 20 year low seasonal level throughout Jan ’22 when regionally weighted by milk production volumes. Rainfall levels finished 72.2% below previous year levels and 70.5% below 20 year average seasonal levels for the month of December. Rainfall levels throughout the North Island of New Zealand declined to a 20 year low seasonal level while rainfall levels experienced throughout the South Island of New Zealand reached a seven year low seasonal level.

Reduced rainfall levels experienced throughout the month of January contributed to New Zealand soil moisture deficits finishing above previous year levels for just the second time in the past 13 months throughout Jan ’22 when regionally weighted by milk production volumes. Soil moisture deficits finished 15.7% above previous year levels and 19.2% above 20 year average seasonal levels for the month of January, reaching the second highest seasonal level experienced throughout the past seven years.

In addition to drier weather experienced throughout the month of January, 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 $8.90-$9.50/kgMS in late Jan ’22, up $0.50/kgMS, or 5.7%, at the midpoint of the forecast. The midpoint of the ’21-’22 farmgate milk price forecast is currently 22.0% above previous year levels and is on pace to reach a record high level.

Cow & Heifer Slaughter

New Zealand cow & heifer slaughter rates declined 10.6% on a YOY basis throughout Dec ’21 when normalizing for slaughter days, remaining at a three year low seasonal level for the second consecutive month. Dec ’21 dairy cow & heifer slaughter, which has more limited historical data available, finished 17.1% 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 0.1% throughout the first seven months 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.