New Zealand Milk Production Update – Feb ’20
Executive Summary
New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Jan ’20. 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 – January production volumes have combined to account for over half of the total annual New Zealand milk production volumes over the past ten years. ’19-’20 YTD New Zealand milk production volumes have declined 0.5% on a YOY basis throughout the first two thirds of the production season however production on a milk-solids basis has increased 0.5% on a YOY basis throughout the period.
Rainfall & Soil Moisture Deficits
Jan ’20 New Zealand rainfall levels remained lower on a YOY basis for the third consecutive month when regionally weighted by milk production, finishing down 54.8% and reaching a 25 year seasonal low level. Rainfall levels finished 70.3% below 20 year average seasonal levels for the month of January. The North Island of New Zealand has been particularly dry over recent months, resulting in the Northland region of New Zealand receiving an official drought declaration in mid-February.
Reduced rainfall levels experienced throughout Jan ’20 have contributed to New Zealand soil moisture deficits finishing above previous year levels for the third consecutive month, finishing up 20.5% and reaching a five year seasonal high level. Soil moisture deficits finished 22.0% above 20 year average seasonal levels for the month of January. Soil moisture deficits reached a 12 year seasonal high level throughout the North Island of New Zealand.
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 reaffirmed the forecasted price in late February but noted the outlook remains fluid as markets balance the impact of coronavirus versus lower production output and weather challenges. 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
New Zealand cow & heifer slaughter rates increased 29.7% on a YOY basis during Jan ’20 when normalizing for slaughter days, finishing higher on a YOY basis for the seventh consecutive month. The YOY increase in slaughter rates was the largest experienced throughout the past ten months on a percentage basis. Jan ’20 dairy cow & heifer slaughter, which has more limited historical data available, also increased on a YOY basis for the seventh consecutive month, finishing up 20.2%.
’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 10.1% throughout the first two thirds of the production season and are on pace to reach a four year high level.
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 declined on a YOY basis for the fourth time in the past five months during Jan ’20, finishing down 0.7%. Production on a milk-solids basis remained higher on a YOY basis for the seventh time in the past eight months, however, finishing up 1.1% YOY.
- 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 reaffirmed the price forecast in late February.
- New Zealand cow & heifer slaughter rates increased 29.7% on a YOY basis during Jan ’20 when normalizing for slaughter days, finishing higher on a YOY basis for the seventh consecutive month.
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 – January production volumes have combined to account for over half of the total annual New Zealand milk production volumes over the past ten years. ’19-’20 YTD New Zealand milk production volumes have declined 0.5% on a YOY basis throughout the first two thirds of the production season however production on a milk-solids basis has increased 0.5% on a YOY basis throughout the period.
Rainfall & Soil Moisture Deficits
Jan ’20 New Zealand rainfall levels remained lower on a YOY basis for the third consecutive month when regionally weighted by milk production, finishing down 54.8% and reaching a 25 year seasonal low level. Rainfall levels finished 70.3% below 20 year average seasonal levels for the month of January. The North Island of New Zealand has been particularly dry over recent months, resulting in the Northland region of New Zealand receiving an official drought declaration in mid-February.
Reduced rainfall levels experienced throughout Jan ’20 have contributed to New Zealand soil moisture deficits finishing above previous year levels for the third consecutive month, finishing up 20.5% and reaching a five year seasonal high level. Soil moisture deficits finished 22.0% above 20 year average seasonal levels for the month of January. Soil moisture deficits reached a 12 year seasonal high level throughout the North Island of New Zealand.
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 reaffirmed the forecasted price in late February but noted the outlook remains fluid as markets balance the impact of coronavirus versus lower production output and weather challenges. 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
New Zealand cow & heifer slaughter rates increased 29.7% on a YOY basis during Jan ’20 when normalizing for slaughter days, finishing higher on a YOY basis for the seventh consecutive month. The YOY increase in slaughter rates was the largest experienced throughout the past ten months on a percentage basis. Jan ’20 dairy cow & heifer slaughter, which has more limited historical data available, also increased on a YOY basis for the seventh consecutive month, finishing up 20.2%.
’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 10.1% throughout the first two thirds of the production season and are on pace to reach a four year high level.
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.