Executive Summary

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

• New Zealand milk production volumes increased 7.6% on a YOY basis during May ’21, reaching a record high seasonal level. The YOY increase in New Zealand milk production volumes was the 12^th experienced throughout the past 13 months.
• Fonterra’s ’20-’21 farmgate milk price forecast of $7.45-$7.65/kgMS is expected to reach a seven year high level on strong Chinese and Southeast Asian powder demand. Fonterra’s initial ’21-’22 farmgate milk price forecast of $7.25-$8.75/kgMS began up an additional 6.0% at the midpoint, although the wide initial range reflects a number of major risks.
• New Zealand cow & heifer slaughter rates increased 12.9% on a YOY basis during Apr ’21 when normalizing for slaughter days, finishing higher for the first time in the past four months.

Additional Report Details

Milk Production

According to Dairy Companies Association of New Zealand (DCANZ), May ’21 New Zealand milk production volumes declined seasonally to a ten month low level but finished 7.6% above previous year levels, reaching a record high seasonal level for the second consecutive month. On a milk-solids basis, production increased 9.4% YOY, also reaching a record high seasonal level.

The May ’21 YOY increase in New Zealand milk production volumes was the 12^th experienced throughout the past 13 months. ’19-’20 annual milk production volumes declined 0.7% on a YOY basis as drought conditions impacted the milk supply. ‘20-’21 annual New Zealand milk production volumes rebounded by 3.0% on a YOY basis, reaching a record high annual level. The 3.0% annual growth rate was the largest experienced throughout the past seven years.

Rainfall & Soil Moisture Deficits

May ’21 New Zealand rainfall volumes finished 20.2% above previous year levels when weighted regionally by milk production volumes, reaching a three year high seasonal level. Rainfall levels remained 6.2% below 20 year average seasonal levels for the month of May, however.

Soil moisture deficits continued to decline seasonally throughout May ’21 while finishing 9.3% below previous year levels when weighted regionally by milk production volumes. May ’21 New Zealand soil moisture deficits remained 44.2% above 20 year average seasonal levels for the month of May, however.

Farmgate Milk Prices

Fonterra’s ’20-’21 farmgate milk price forecast of $7.45-$7.65/kgMS is expected to reach a seven year high level on strong Chinese and Southeast Asian powder demand. Fonterra’s initial ’21-’22 farmgate milk price forecast of $7.25-$8.75/kgMS began up an additional 6.0% at the midpoint, although the wide initial range reflects major risks including the impact of governments winding back their economic stimulus packages, foreign exchange volatility, changes in global supply and demand patterns at current high price levels, and geopolitical issues.

Cow & Heifer Slaughter

New Zealand cow & heifer slaughter rates increased 12.9% on a YOY basis during Apr ’21 when normalizing for slaughter days, finishing higher for the first time in the past four months. Apr ’21 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 13.8%.

’19-’20 annual New Zealand cow & heifer slaughter rebounded 2.7% from the previous year, reaching a four year high level. ’20-’21 YTD New Zealand cow & heifer slaughter has increased by an additional 4.8% on a YOY basis heading into the final month of the production season and is on pace to reach the second highest annual level on record.

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.