New Zealand Milk Production Update – Nov ’15
According to Dairy Companies Association of New Zealand (DCANZ), Oct ’15 New Zealand milk production declined YOY for the third consecutive month, finishing 2.7% below the previous year. The recently experienced YOY declines will likely have a significant effect on annual production totals, as September – October milk production has accounted for over a quarter of annual New Zealand production on average throughout the past five years.
Despite the recent warnings of an El Niño event potentially resulting in dry conditions across New Zealand, cold, wet weather is affecting forage conditions across New Zealand, contributing to the recent YOY declines in milk production. Although precipitation has remained above historical levels, an El Niño event remains a distinct possibility throughout coming months. The National Oceanic and Atmospheric Administration Oceanic Niño Index and Multivariate ENSO Index, measures used to identify the intensity of El Niño events, each increased to new 17 year highs throughout Sep ’15, indicating that a significant El Niño event likely remains in development.
In addition to the potential for continued adverse weather conditions, New Zealand Farmgate Milk Prices remain weak, contributing to the recent declines in milk production. In Sep ’15, Fonterra revised its forecasted Farmgate Milk Price for the ’15-’16 season upward from the previous ten year low of$3.85/kgMS to $4.60/kgMS due to expected production declines of approximately 5% YOY throughout the season. The current forecast would be $0.20/kgMS higher than the ’14-’15 pay price but $1.25/kgMS, or 21.3%, below the ten year average price. ’15-’16 annual New Zealand milk production has declined by 3.5% YOY throughout the first five months of the production season.
Lower Farmgate Milk Prices have resulted in tight cashflows and an increase in slaughter rates. New Zealand dairy producers have recently culled at a record heavy pace, sending low-producing cows to slaughter in order to mitigate costs and provide a near-term injection of cash. Oct ’15 New Zealand cow & heifer slaughter declined from Sep ’15 levels but remained just 3.0% below the record October slaughter experienced during the previous year.
The recent increases in New Zealand cow & heifer slaughter have corresponded with the YOY decline in milk production exhibited throughout the past two months. Additional heavy culling is expected to continue to reduce milk production in coming months as, according to Fonterra, New Zealand dairy producers continue to reduce stocking rates and supplementary feed to help reduce costs in the low milk price environment.
Weaker export demand for New Zealand dairy products has also become a concern for New Zealand dairy producers over recent months. New Zealand dairy exports remained lower on a YOY basis for the third consecutive month in Oct ’15, finishing 17.0% below the previous year. New Zealand powder export volumes destined to China were particularly weak, declining by 30.7% YOY during Oct ’15.
Despite the recent warnings of an El Niño event potentially resulting in dry conditions across New Zealand, cold, wet weather is affecting forage conditions across New Zealand, contributing to the recent YOY declines in milk production. Although precipitation has remained above historical levels, an El Niño event remains a distinct possibility throughout coming months. The National Oceanic and Atmospheric Administration Oceanic Niño Index and Multivariate ENSO Index, measures used to identify the intensity of El Niño events, each increased to new 17 year highs throughout Sep ’15, indicating that a significant El Niño event likely remains in development.
In addition to the potential for continued adverse weather conditions, New Zealand Farmgate Milk Prices remain weak, contributing to the recent declines in milk production. In Sep ’15, Fonterra revised its forecasted Farmgate Milk Price for the ’15-’16 season upward from the previous ten year low of$3.85/kgMS to $4.60/kgMS due to expected production declines of approximately 5% YOY throughout the season. The current forecast would be $0.20/kgMS higher than the ’14-’15 pay price but $1.25/kgMS, or 21.3%, below the ten year average price. ’15-’16 annual New Zealand milk production has declined by 3.5% YOY throughout the first five months of the production season.
Lower Farmgate Milk Prices have resulted in tight cashflows and an increase in slaughter rates. New Zealand dairy producers have recently culled at a record heavy pace, sending low-producing cows to slaughter in order to mitigate costs and provide a near-term injection of cash. Oct ’15 New Zealand cow & heifer slaughter declined from Sep ’15 levels but remained just 3.0% below the record October slaughter experienced during the previous year.
The recent increases in New Zealand cow & heifer slaughter have corresponded with the YOY decline in milk production exhibited throughout the past two months. Additional heavy culling is expected to continue to reduce milk production in coming months as, according to Fonterra, New Zealand dairy producers continue to reduce stocking rates and supplementary feed to help reduce costs in the low milk price environment.
Weaker export demand for New Zealand dairy products has also become a concern for New Zealand dairy producers over recent months. New Zealand dairy exports remained lower on a YOY basis for the third consecutive month in Oct ’15, finishing 17.0% below the previous year. New Zealand powder export volumes destined to China were particularly weak, declining by 30.7% YOY during Oct ’15.