New Zealand Milk Production Update – Jul ’20
Executive Summary
New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Jun ’20. Highlights from the updated report include:
The Jun ’20 YOY increase in New Zealand milk production volumes was the second experienced in a row. New Zealand milk production volumes had finished lower on a YOY basis over seven of the past eight months prior to the two most recent increases in production. ’19-’20 annual milk production volumes declined 0.7% on a YOY basis however production on a milk-solids basis increased 0.3% YOY throughout the period. Recently experienced drought conditions, particularly on the North Island, impacted the milk supply throughout the ’19-’20 production season. COVID-19 has not impacted the milk supply to date as volumes are winding down seasonally but is likely to disrupt export supply chains throughout the second half of 2020.
Farmgate Milk Prices
Fonterra’s current ’19-’20 farmgate milk price forecast was reduced to a midpoint of $7.15/kgMS during Jul ’20, down slightly from the previous midpoint of $7.20/kgMS, citing a strengthening New Zealand dollar relative to the U.S. dollar over the past two months. The ’19-’20 farmgate milk price forecast remains on pace to reach a six year high level. Fonterra announced an opening ’20-’21 farmgate milk price forecast of $5.40-$6.90/kgMS during May ’20, with the wide range reflecting the heightened uncertainty surrounding the COVID-19 outlook. The ’20-’21 farmgate milk price forecast was revised $0.50/kgMS higher on the low end of the range during Jul ’20 while remaining unchanged on the high end of the price range. Improved market conditions within China were cited as the driver behind the increase on the bottom end of the price range.
Cow & Heifer Slaughter
New Zealand cow & heifer slaughter rates increased 7.0% on a YOY basis during Jun ’20 when normalizing for slaughter days, reaching the highest seasonal figure on record. The YOY increase in New Zealand cow & heifer slaughter rates was the first experienced throughout the past four months. Jun ’20 dairy cow & heifer slaughter, which has more limited historical data available, also increased on a YOY basis for the first time in the past four months, finishing up 10.5%.
’19-’20 annual New Zealand cow & heifer slaughter rates rebounded 2.7% from the previous year, reaching 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 to a 12 month low level but remained at a record high seasonal level for the second consecutive month during Jun ’20, finishing up 1.8%. New Zealand milk production volume typically reach seasonal low levels throughout the month of June.
- Fonterra announced an opening ’20-’21 farmgate milk price forecast of $5.40-$6.90/kgMS during May ’20, with the wide range reflecting the heightened uncertainty surrounding the COVID-19 outlook. The ’20-’21 farmgate milk price forecast was revised $0.50/kgMS higher on the low end of the range during Jul ’20 while remaining unchanged on the high end of the price range.
- New Zealand cow & heifer slaughter rates increased 7.0% on a YOY basis during Jun ’20 when normalizing for slaughter days, reaching the highest seasonal figure on record.
The Jun ’20 YOY increase in New Zealand milk production volumes was the second experienced in a row. New Zealand milk production volumes had finished lower on a YOY basis over seven of the past eight months prior to the two most recent increases in production. ’19-’20 annual milk production volumes declined 0.7% on a YOY basis however production on a milk-solids basis increased 0.3% YOY throughout the period. Recently experienced drought conditions, particularly on the North Island, impacted the milk supply throughout the ’19-’20 production season. COVID-19 has not impacted the milk supply to date as volumes are winding down seasonally but is likely to disrupt export supply chains throughout the second half of 2020.
Farmgate Milk Prices
Fonterra’s current ’19-’20 farmgate milk price forecast was reduced to a midpoint of $7.15/kgMS during Jul ’20, down slightly from the previous midpoint of $7.20/kgMS, citing a strengthening New Zealand dollar relative to the U.S. dollar over the past two months. The ’19-’20 farmgate milk price forecast remains on pace to reach a six year high level. Fonterra announced an opening ’20-’21 farmgate milk price forecast of $5.40-$6.90/kgMS during May ’20, with the wide range reflecting the heightened uncertainty surrounding the COVID-19 outlook. The ’20-’21 farmgate milk price forecast was revised $0.50/kgMS higher on the low end of the range during Jul ’20 while remaining unchanged on the high end of the price range. Improved market conditions within China were cited as the driver behind the increase on the bottom end of the price range.
Cow & Heifer Slaughter
New Zealand cow & heifer slaughter rates increased 7.0% on a YOY basis during Jun ’20 when normalizing for slaughter days, reaching the highest seasonal figure on record. The YOY increase in New Zealand cow & heifer slaughter rates was the first experienced throughout the past four months. Jun ’20 dairy cow & heifer slaughter, which has more limited historical data available, also increased on a YOY basis for the first time in the past four months, finishing up 10.5%.
’19-’20 annual New Zealand cow & heifer slaughter rates rebounded 2.7% from the previous year, reaching 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.