New Zealand Milk Production Update – Nov ’20
Executive Summary
New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Oct ’20. Highlights from the updated report include:
The Oct ’20 YOY increase in New Zealand milk production volumes was the sixth experienced in a row but the smallest experienced over the six month period on a percentage basis. ’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. Drought conditions impacted the milk supply throughout the ’19-’20 production season. ‘20-’21 YTD New Zealand milk production volumes have rebounded by 2.1% on a YOY basis throughout the first five months of the production season.
Rainfall & Soil Moisture Deficits
New Zealand rainfall remained below previous year levels for the fourth consecutive month throughout Oct ’20 when weighted regionally by milk production volumes. Rainfall levels finished 21.2% below the previous year and 14.6% below 20 year average seasonal levels for the month of October. Oct ’20 rainfall throughout the North Island of New Zealand reached a five year low seasonal level.
Reduced rainfall levels experienced throughout the past few months have resulted in New Zealand soil moisture deficits remaining higher on a YOY basis throughout the month of October. Oct ’20 New Zealand soil moisture deficits finished 95.4% above previous year levels and 38.4% above 20 year average seasonal levels for the month of October.
Farmgate Milk Prices
Fonterra finalized their ’19-’20 farmgate milk price at a value of $7.14/kgMS in Sep ’20, reaching a six year high level. Fonterra’s ’20-’21 farmgate milk price forecast was revised $0.40/kgMS higher at the midpoint during Oct ’20, reaching a range of $6.30-$7.30/kgMS. Fonterra stated the ’20-’21 farmgate milk price forecast was revised higher largely due to improved Chinese demand. Fonterra’s ’20-’21 farmgate milk price forecast range remains historically wide as significant uncertainties remain surrounding the impact of COVID-19 on global demand.
Cow & Heifer Slaughter
New Zealand cow & heifer slaughter rates increased 0.6% on a YOY basis during Oct ’20 when normalizing for slaughter days, finishing higher for the fourth time in the past five months. Oct ’20 dairy cow & heifer slaughter, which has more limited historical data available, declined on a YOY basis for the second consecutive month, however, finishing down 8.4%.
’19-’20 annual New Zealand cow & heifer slaughter rates rebounded 2.7% from the previous year, reaching a four year high level. ’20-’21 YTD New Zealand cow & heifer slaughter rates have increased by an additional 6.7% on a YOY basis throughout the first five months 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 0.8% on a YOY basis during Oct ’20, finishing higher for the sixth consecutive month.
- Fonterra’s ’20-’21 farmgate milk price forecast of $6.30-$7.30/kgMS was revised $0.40/kgMS higher throughout Oct ’20 on improved Chinese demand. The ’20-’21 farmgate milk price forecast remained below the six year high level experienced throughout the previous production season at the midpoint of the estimate, however.
- New Zealand cow & heifer slaughter rates increased 0.6% on a YOY basis during Oct ’20 when normalizing for slaughter days, finishing higher for the fourth time in the past five months.
The Oct ’20 YOY increase in New Zealand milk production volumes was the sixth experienced in a row but the smallest experienced over the six month period on a percentage basis. ’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. Drought conditions impacted the milk supply throughout the ’19-’20 production season. ‘20-’21 YTD New Zealand milk production volumes have rebounded by 2.1% on a YOY basis throughout the first five months of the production season.
Rainfall & Soil Moisture Deficits
New Zealand rainfall remained below previous year levels for the fourth consecutive month throughout Oct ’20 when weighted regionally by milk production volumes. Rainfall levels finished 21.2% below the previous year and 14.6% below 20 year average seasonal levels for the month of October. Oct ’20 rainfall throughout the North Island of New Zealand reached a five year low seasonal level.
Reduced rainfall levels experienced throughout the past few months have resulted in New Zealand soil moisture deficits remaining higher on a YOY basis throughout the month of October. Oct ’20 New Zealand soil moisture deficits finished 95.4% above previous year levels and 38.4% above 20 year average seasonal levels for the month of October.
Farmgate Milk Prices
Fonterra finalized their ’19-’20 farmgate milk price at a value of $7.14/kgMS in Sep ’20, reaching a six year high level. Fonterra’s ’20-’21 farmgate milk price forecast was revised $0.40/kgMS higher at the midpoint during Oct ’20, reaching a range of $6.30-$7.30/kgMS. Fonterra stated the ’20-’21 farmgate milk price forecast was revised higher largely due to improved Chinese demand. Fonterra’s ’20-’21 farmgate milk price forecast range remains historically wide as significant uncertainties remain surrounding the impact of COVID-19 on global demand.
Cow & Heifer Slaughter
New Zealand cow & heifer slaughter rates increased 0.6% on a YOY basis during Oct ’20 when normalizing for slaughter days, finishing higher for the fourth time in the past five months. Oct ’20 dairy cow & heifer slaughter, which has more limited historical data available, declined on a YOY basis for the second consecutive month, however, finishing down 8.4%.
’19-’20 annual New Zealand cow & heifer slaughter rates rebounded 2.7% from the previous year, reaching a four year high level. ’20-’21 YTD New Zealand cow & heifer slaughter rates have increased by an additional 6.7% on a YOY basis throughout the first five months 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.