New Zealand Milk Production Update – Oct ’19
Executive Summary
New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Sep ’19. Highlights from the updated report include:
Mild weather conditions were experienced throughout New Zealand’s winter months, likely contributing to recent YOY increases in production growth, however the growing popularity of winter milking also likely skewed the production numbers higher. Heading into the New Zealand spring months, the expectation is for flat or reduced production figures, although spring weather can have a large influence on production prospects. ’19-’20 YTD New Zealand milk production volumes have increased 0.7% on a YOY basis throughout the first third of the production season and are on pace to reach a record high annual level. The first third of the New Zealand milk production season has accounted for just 19.9% of annual milk production volumes on average over the past ten years, however. New Zealand milk production volumes will increase seasonally until highs are experienced throughout the month of October.
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 have trended flat-to-lower over the four most recent production seasons 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 rebound slightly on a YOY basis throughout 2019, however, increasing 0.1% to a four year high level.
Farmgate Milk Prices
Fonterra farmgate milk prices reached a nine year low during the ’15-’16 production season as concerns over a potential El Niño event mounted while global milk supplies expanded significantly, particularly from within the EU-28. Fonterra farmgate milk prices rebounded throughout the ’16-’17 and ’17-’18 production seasons as a gradual rebalancing of global supply and demand took place, while Fonterra’s ’18-’19 final farmgate milk price forecast of $6.35/kgMS declined 5.1% from the previous production season but remained above break-even levels. Fonterra’s ’19-’20 farmgate milk price forecast of $6.55-$7.55/kgMS was raised by $0.30/kgMS in Oct ’19 and is on pace to reach a six year high at the midpoint of the forecast. Fonterra noted firm global demand for whole milk powder but kept a wide price range due to geopolitical uncertainty and the risk of weather developments later in the New Zealand production season.
Cow & Heifer Slaughter
Aug ‘19 New Zealand cow & heifer slaughter rates finished 12.5% higher YOY when normalizing for slaughter days but remained at the second lowest seasonal level experienced throughout the past five years. The Aug ’19 YOY increase in New Zealand cow & heifer slaughter rates was the second experienced in a row. Aug ‘19 dairy cow & heifer slaughter, which has more limited historical data available, also increased on a YOY basis for the second consecutive month, finishing up 0.2%. ’18-’19 annual New Zealand cow & heifer slaughter rates declined 0.7% YOY while finishing 2.3% below three year average figures, however ’19-’20 YTD slaughter figures have rebounded by 3.9% throughout the first quarter of the production season.
- Sep ’19 New Zealand milk production volumes declined 0.7% on a YOY basis, finishing lower for the first time in the past four months. Production on a milk-solids basis remained higher, however, increasing by 0.7% YOY.
- Fonterra’s ’19-’20 farmgate milk price forecast of $6.55-$7.55/kgMS was raised by $0.30/kgMS in Oct ’19 and is on pace to reach a six year high at the midpoint of the forecast.
- Aug ’19 New Zealand cow & heifer slaughter rates increased 12.5% YOY when normalizing for slaughter days but remained at the second lowest seasonal level experienced throughout the past five years.
Mild weather conditions were experienced throughout New Zealand’s winter months, likely contributing to recent YOY increases in production growth, however the growing popularity of winter milking also likely skewed the production numbers higher. Heading into the New Zealand spring months, the expectation is for flat or reduced production figures, although spring weather can have a large influence on production prospects. ’19-’20 YTD New Zealand milk production volumes have increased 0.7% on a YOY basis throughout the first third of the production season and are on pace to reach a record high annual level. The first third of the New Zealand milk production season has accounted for just 19.9% of annual milk production volumes on average over the past ten years, however. New Zealand milk production volumes will increase seasonally until highs are experienced throughout the month of October.
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 have trended flat-to-lower over the four most recent production seasons 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 rebound slightly on a YOY basis throughout 2019, however, increasing 0.1% to a four year high level.
Farmgate Milk Prices
Fonterra farmgate milk prices reached a nine year low during the ’15-’16 production season as concerns over a potential El Niño event mounted while global milk supplies expanded significantly, particularly from within the EU-28. Fonterra farmgate milk prices rebounded throughout the ’16-’17 and ’17-’18 production seasons as a gradual rebalancing of global supply and demand took place, while Fonterra’s ’18-’19 final farmgate milk price forecast of $6.35/kgMS declined 5.1% from the previous production season but remained above break-even levels. Fonterra’s ’19-’20 farmgate milk price forecast of $6.55-$7.55/kgMS was raised by $0.30/kgMS in Oct ’19 and is on pace to reach a six year high at the midpoint of the forecast. Fonterra noted firm global demand for whole milk powder but kept a wide price range due to geopolitical uncertainty and the risk of weather developments later in the New Zealand production season.
Cow & Heifer Slaughter
Aug ‘19 New Zealand cow & heifer slaughter rates finished 12.5% higher YOY when normalizing for slaughter days but remained at the second lowest seasonal level experienced throughout the past five years. The Aug ’19 YOY increase in New Zealand cow & heifer slaughter rates was the second experienced in a row. Aug ‘19 dairy cow & heifer slaughter, which has more limited historical data available, also increased on a YOY basis for the second consecutive month, finishing up 0.2%. ’18-’19 annual New Zealand cow & heifer slaughter rates declined 0.7% YOY while finishing 2.3% below three year average figures, however ’19-’20 YTD slaughter figures have rebounded by 3.9% throughout the first quarter of the production season.