New Zealand Milk Production Update – Jan ’20
Executive Summary
New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Nov ’19. Highlights from the updated report include:
New Zealand milk production volumes typically reach a peak seasonal level throughout the month of October, prior to declining until seasonal lows are experienced throughout the months of June and July. October and November production volumes have combined to account for over a quarter of total annual New Zealand milk production volumes over the past ten years. The Oct ’19 YOY decline in New Zealand milk production volumes more than offset YOY gains experienced throughout four of the first six months of the ’19-’20 production season. ’19-’20 YTD New Zealand milk production volumes have declined 0.4% on a YOY basis throughout the first half of the production season.
Rainfall & Soil Moisture Deficits
Dec ’19 New Zealand rainfall levels remained lower on a YOY basis for the second consecutive month when regionally weighted by milk production, finishing down 7.7%. Rainfall levels remained above 20 year average seasonal levels for the fifth time in the past six months, however, finishing up 23.6%.
Reduced rainfall levels experienced throughout Dec ’19 have contributed to New Zealand soil moisture deficits finishing above previous year levels for the second consecutive month, up 48.8%. Nov ’19 New Zealand soil moisture deficits remained 5.9% below 20 year average seasonal levels, however.
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 current ’19-’20 farmgate milk price forecast of $7.00-$7.60/kgMS was raised by an average of $0.25/kgMS, or 3.5%, in Dec ’19 and is on pace to reach a six year high at the midpoint of the forecast. Fonterra noted recent Global Dairy Trade price appreciation and a favorable global supply and demand balance as drivers to the increase in forecasted pay prices. Fonterra’s current ’19-’20 farmgate milk price forecast has increased by a total of $0.55/kgMS, or 8.1%, since the opening forecast in May ’19.
Cow & Heifer Slaughter
Nov ‘19 New Zealand cow & heifer slaughter rates finished 1.7% higher YOY when normalizing for slaughter days, reaching a four year seasonal high level. The YOY increase in cow & heifer slaughter rates was the fifth experienced in a row. Nov ‘19 dairy cow & heifer slaughter, which has more limited historical data available, also increased on a YOY basis for the fifth consecutive month, finishing up 5.3%.
’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 5.3% throughout the first half of the production season.
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 decline slightly on a YOY basis throughout 2020 but remain above the six year low level experienced throughout 2017.
- New Zealand milk production volumes increased on a YOY basis for the first time in the past three months during Nov ’19, finishing up 0.3%.
- Fonterra’s current ’19-’20 farmgate milk price forecast of $7.00-$7.60/kgMS was raised by an average of $0.25/kgMS, or 3.5%, in Dec ’19 and is on pace to reach a six year high at the midpoint of the forecast.
- Nov ’19 New Zealand cow & heifer slaughter rates increased 1.7% YOY when normalizing for slaughter days, reaching a four year seasonal high level. The YOY increase in cow & heifer slaughter rates was the fifth experienced in a row.
New Zealand milk production volumes typically reach a peak seasonal level throughout the month of October, prior to declining until seasonal lows are experienced throughout the months of June and July. October and November production volumes have combined to account for over a quarter of total annual New Zealand milk production volumes over the past ten years. The Oct ’19 YOY decline in New Zealand milk production volumes more than offset YOY gains experienced throughout four of the first six months of the ’19-’20 production season. ’19-’20 YTD New Zealand milk production volumes have declined 0.4% on a YOY basis throughout the first half of the production season.
Rainfall & Soil Moisture Deficits
Dec ’19 New Zealand rainfall levels remained lower on a YOY basis for the second consecutive month when regionally weighted by milk production, finishing down 7.7%. Rainfall levels remained above 20 year average seasonal levels for the fifth time in the past six months, however, finishing up 23.6%.
Reduced rainfall levels experienced throughout Dec ’19 have contributed to New Zealand soil moisture deficits finishing above previous year levels for the second consecutive month, up 48.8%. Nov ’19 New Zealand soil moisture deficits remained 5.9% below 20 year average seasonal levels, however.
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 current ’19-’20 farmgate milk price forecast of $7.00-$7.60/kgMS was raised by an average of $0.25/kgMS, or 3.5%, in Dec ’19 and is on pace to reach a six year high at the midpoint of the forecast. Fonterra noted recent Global Dairy Trade price appreciation and a favorable global supply and demand balance as drivers to the increase in forecasted pay prices. Fonterra’s current ’19-’20 farmgate milk price forecast has increased by a total of $0.55/kgMS, or 8.1%, since the opening forecast in May ’19.
Cow & Heifer Slaughter
Nov ‘19 New Zealand cow & heifer slaughter rates finished 1.7% higher YOY when normalizing for slaughter days, reaching a four year seasonal high level. The YOY increase in cow & heifer slaughter rates was the fifth experienced in a row. Nov ‘19 dairy cow & heifer slaughter, which has more limited historical data available, also increased on a YOY basis for the fifth consecutive month, finishing up 5.3%.
’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 5.3% throughout the first half of the production season.
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 decline slightly on a YOY basis throughout 2020 but remain above the six year low level experienced throughout 2017.