Executive Summary

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

• New Zealand milk production volumes declined 3.3% on a YOY basis throughout Oct ’21, remaining at a four year low seasonal level. The YOY decline in New Zealand milk production volumes was the second largest experienced throughout the past 30 months on an absolute basis, trailing only the previous month’s decline.
• Fonterra’s ’21-’22 farmgate milk price forecast of $7.90-$8.90/kgMS is currently 11.4% above the seven year high level experienced throughout the previous season at the midpoint of the forecast and is on pace to tie the record high level experienced throughout the ’13-’14 production season.
• New Zealand cow & heifer slaughter rates increased 3.4% on a YOY basis throughout Oct ’21 when normalizing for slaughter days, reaching a record high seasonal level.

Additional Report Details

Milk Production

According to Dairy Companies Association of New Zealand (DCANZ), Oct ’21 New Zealand milk production volumes increased seasonally to a 12 month high level but finished 3.3% below previous year levels. Oct ‘21 New Zealand milk production volumes remained at a four year low seasonal level for the second consecutive month. On a milk-solids basis, production declined 3.1% YOY, also reaching a four year low seasonal level.

The Oct ’21 YOY decline in New Zealand milk production volumes was the third experienced in a row and the second largest experienced throughout the past 30 months on an absolute basis, trailing only the previous month’s decline. New Zealand milk production volumes had finished above previous year levels over eight consecutive months through Jul ’21, prior to declining on a YOY basis over the three most recent months of available data.

‘20-’21 annual New Zealand milk production volumes increased 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. ‘21-’22 YTD New Zealand milk production volumes have declined by 3.4% on a YOY basis throughout the first five months of the production season, however, and is pace to reach a four year low level.

Rainfall & Soil Moisture Deficits

New Zealand rainfall remained above long-term historical seasonal levels throughout Oct ’21 when regionally weighted by milk production volumes, reaching an eight year high seasonal level. Rainfall levels finished 31.1% above previous year levels and 12.1% above 20 year average seasonal levels for the month of October. Rainfall levels experienced throughout the North Island of New Zealand reached a ten year high seasonal level throughout Oct ’21. Total New Zealand rainfall levels have finished 10.6% above previous year levels throughout the first five months of the ’21-’22 production season.

New Zealand soil moisture deficits remained below previous year levels for the tenth consecutive month throughout Oct ’21 when regionally weighted by milk production volumes, finishing 47.3% below previous year levels. Soil moisture deficits reached the second lowest seasonal level experienced throughout the past 12 years.

The cold, wet spring weather has contributed to the recent declines in New Zealand milk production volumes. According to the USDA, producers are hopeful that current soil moisture may carry pastures further into the Southern Hemisphere summer months. A later calving season may push the highly seasonal New Zealand milk curve out, with YOY gains in production experienced following the typical seasonal peak in production experienced throughout the month of November.

Farmgate Milk Prices

Fonterra’s final ’20-’21 farmgate milk price of $7.54/kgMS reached a seven year high level on strong Chinese and Southeast Asian powder demand. Fonterra raised their ’21-’22 farmgate milk price forecast to a value of $7.90-$8.90/kgMS in late Oct ’21, up $0.40/kgMS, or 4.8%, from the previous forecast. The midpoint of the ’21-’22 farmgate milk price forecast is currently 11.4% above previous year levels and is on pace to tie the record high level experienced throughout the ’13-’14 production season.

Cow & Heifer Slaughter

New Zealand cow & heifer slaughter rates increased 3.4% on a YOY basis throughout Oct ’21 when normalizing for slaughter days, reaching a record high seasonal level. New Zealand cow & heifer rates have finished above previous year figures over three consecutive months through Oct ’21. Oct ’21 dairy cow & heifer slaughter, which has more limited historical data available, finished 7.4% above previous year levels.

’20-’21 annual New Zealand cow & heifer slaughter finished 4.0% above the previous year, reaching a five year high level and the third highest annual figure on record. ’21-’22 YTD New Zealand cow & heifer slaughter rates have increased by an additional 4.3% throughout the first five months of the production season and are on pace to reach a record high annual 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 growth has moderated over more recent years 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 1.5% on a YOY basis throughout 2021, reaching a ten year low level.