New Zealand Milk Production Update – Jun ’16
Executive Summary
New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through May ’16. Highlights from the updated report include:
• New Zealand milk production increased on a year-over-year basis for the first time in nine months during May ’16, finishing 3.5% above the previous year.
• ’15-’16 New Zealand Farmgate Milk Price projections remained at a nine year low while the ’16-’17 opening Farmgate Milk Price announced in late May ’16 was set 9.0% above ’15-’16 prices, but below expectations.
• Low Farmgate Milk Prices have contributed to Apr ’16 New Zealand cow & heifer slaughter rates reaching a record high for the month of April. Slaughter rates finished up 22.1% YOY and 9.4% above the previous record April high experienced in 2010.
Additional Report Details
According to DCANZ, May ’16 New Zealand milk production increased on a YOY basis for the first time in nine months, finishing 3.5% above the previous year. Milk production continued to decline seasonally, however, finishing 41.4% lower MOM on a daily average basis. The MOM decline was slightly less than the five year average April – May seasonal decline of 45.3%. New Zealand milk production declines significantly throughout the southern hemisphere winter months as farmers dry off their dairy cow herds. May milk production has consisted of just 3.4% of annual production levels throughout the past ten years.
Despite warnings of an El Niño event potentially resulting in dry conditions across New Zealand, better than anticipated growing conditions have resulted in only moderate YOY declines in milk production over recent months. ’15-’16 annual New Zealand milk production finished down just 1.9%, significantly less than Fonterra’s Mar ’16 projected annual YOY decline in milk collections of 4.0%.
Timely rainfall was experienced across the majority of New Zealand during the early months of 2016, reducing seasonally higher than average soil moisture deficits experienced in late 2015. Improving weather conditions contributed to YOY declines in New Zealand cow & heifer slaughter rates throughout the first quarter of 2016 however, more recently, slaughter rates increased to a record high figure for the month of April, finishing 22.1% above the previous year and 9.4% above the previous April record high experienced during 2010. ’15-’16 YTD slaughter rates are up 3.7% throughout the first 11 months of the production season.
Slaughter rates have accelerated as New Zealand Farmgate Milk Prices continue to trend lower. In early Mar ’16, Fonterra revised its forecasted ’15-’16 Farmgate Milk Price lower by $0.25/kgMS, or 6.0%, to $3.90/kgMS, a nine year low. The current price forecast would be $0.50/kgMS, or 11.4%, below the ’14-’15 pay price and $1.95/kgMS, or 33.3%, below the ten year average price. The Fonterra forecasted ’15-’16 Farmgate Milk Price has been revised a total of $0.70/kgMS lower throughout 2016 as oversupplied global markets have been slow to respond with production cuts, particularly within the EU-28.
Fonterra released a ’16-’17 opening Farmgate Milk Price of $4.25/kgMS during late May ’16, which was an increase of $0.35/kgMS from the current season forecast but lower than general expectations. Producer cashflows will remain under considerable financial pressure into 2017, which could result in continued aggressive culling and pullbacks in production levels.
In addition to lower Farmgate Milk Prices, 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 finished 28.5% lower on a YOY basis during Mar ’16, reaching a seven year low for the month of March. ’15-’16 YTD export volumes are down 9.6% YOY throughout the first ten months of the production season.
Despite warnings of an El Niño event potentially resulting in dry conditions across New Zealand, better than anticipated growing conditions have resulted in only moderate YOY declines in milk production over recent months. ’15-’16 annual New Zealand milk production finished down just 1.9%, significantly less than Fonterra’s Mar ’16 projected annual YOY decline in milk collections of 4.0%.
Timely rainfall was experienced across the majority of New Zealand during the early months of 2016, reducing seasonally higher than average soil moisture deficits experienced in late 2015. Improving weather conditions contributed to YOY declines in New Zealand cow & heifer slaughter rates throughout the first quarter of 2016 however, more recently, slaughter rates increased to a record high figure for the month of April, finishing 22.1% above the previous year and 9.4% above the previous April record high experienced during 2010. ’15-’16 YTD slaughter rates are up 3.7% throughout the first 11 months of the production season.
Slaughter rates have accelerated as New Zealand Farmgate Milk Prices continue to trend lower. In early Mar ’16, Fonterra revised its forecasted ’15-’16 Farmgate Milk Price lower by $0.25/kgMS, or 6.0%, to $3.90/kgMS, a nine year low. The current price forecast would be $0.50/kgMS, or 11.4%, below the ’14-’15 pay price and $1.95/kgMS, or 33.3%, below the ten year average price. The Fonterra forecasted ’15-’16 Farmgate Milk Price has been revised a total of $0.70/kgMS lower throughout 2016 as oversupplied global markets have been slow to respond with production cuts, particularly within the EU-28.
Fonterra released a ’16-’17 opening Farmgate Milk Price of $4.25/kgMS during late May ’16, which was an increase of $0.35/kgMS from the current season forecast but lower than general expectations. Producer cashflows will remain under considerable financial pressure into 2017, which could result in continued aggressive culling and pullbacks in production levels.
In addition to lower Farmgate Milk Prices, 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 finished 28.5% lower on a YOY basis during Mar ’16, reaching a seven year low for the month of March. ’15-’16 YTD export volumes are down 9.6% YOY throughout the first ten months of the production season.