Executive Summary

New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through Jan ’21. Highlights from the updated report include:

• New Zealand milk production volumes increased 0.8% on a YOY basis during Jan ’21, reaching a six year high seasonal level. The YOY increase in New Zealand milk production volumes was the eighth experienced throughout the past nine months.
• Fonterra’s ’20-’21 farmgate milk price forecast of $6.90-$7.50/kgMS was revised $0.20/kgMS higher throughout Feb ’21 on strong Chinese and Southeast Asian powder demand. The ’20-’21 farmgate milk price forecast is on pace to reach a seven year high level at the midpoint of the estimate.
• New Zealand cow & heifer slaughter rates declined 8.0% on a YOY basis during Jan ’21 when normalizing for slaughter days, finishing lower for the first time in the past four months.

Additional Report Details

Milk Production

According to Dairy Companies Association of New Zealand (DCANZ), Jan ’21 New Zealand milk production volumes increased 0.8% on a YOY basis, reaching a six year high seasonal level. On a milk-solids basis, production increased 0.4% YOY, reaching a record high seasonal level.

The Jan ’21 YOY increase in New Zealand milk production volumes was the eighth experienced throughout the past nine months. ’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 0.8% on a YOY basis throughout the first two thirds of the production season.

Rainfall & Soil Moisture Deficits

Jan ’21 New Zealand rainfall volumes rebounded to a three year high seasonal level when weighted regionally by milk production volumes, finishing 244.0% above the 25 year low seasonal level experienced throughout the previous year. Rainfall levels finished 7.1% above 20 year average seasonal levels for the month of January.

Increased rainfall levels experienced throughout the month of January contributed to soil moisture deficits finishing lower on a YOY basis. Jan ’21 New Zealand soil moisture deficits finished 16.7% below previous year levels but remained 1.8% above 20 year average seasonal levels for the month of January.

Farmgate Milk Prices

Fonterra’s farmgate milk price reached a six year high level of $7.14/kgMS throughout the ’19-’20 production season. Fonterra’s ’20-’21 farmgate milk price forecast was revised $0.20/kgMS higher during Feb ’21, reaching a range of $6.90-$7.50/kgMS. Fonterra stated the ’20-’21 farmgate milk price forecast was revised higher largely due to strong whole milk powder and skim milk powder demand from China and Southeast Asia. The ’20-’21 farmgate milk price forecast is on pace to reach a seven year high level at the midpoint of the estimate.

Cow & Heifer Slaughter

New Zealand cow & heifer slaughter rates declined 8.0% on a YOY basis during Jan ’21 when normalizing for slaughter days, finishing lower for the first time in the past four months. Jan ’21 dairy cow & heifer slaughter, which has more limited historical data available, declined on a YOY basis for the first time in the past three months, finishing down 14.5%.

’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 5.9% on a YOY basis throughout the first two thirds of the production season and are on pace to reach a record high annual level, despite the most recent decline.

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 five 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 2.6% on a YOY basis throughout 2020 and an additional 0.3% YOY throughout 2021, reaching an 11 year low level.