New Zealand Milk Production Update – Apr ’15
According to Dairy Companies Association of New Zealand (DCANZ), Feb ’15 New Zealand milk production declined YOY for the first time in 19 months, finishing 5.7% lower than the previous year. Monthly production also declined 17.0% MOM on a daily average basis as production continues to decline seasonally. The 17.0% January – February decline in production was significantly larger than the five year average 10.7% decline over the same period. New Zealand milk production has been tempered of late due to dry conditions and lower Farmgate Milk Prices. In early Dec ’14, Fonterra revised its forecasted Farmgate Milk Price for the ’14-’15 season from $5.30/kgMS to $4.70/kgMS, noting that falling oil prices, geopolitical uncertainty in Russia and Ukraine, and subdued demand from China has contributed to ongoing volatility and weak demand in global dairy markets. In addition, dry conditions over both islands have raised drought concerns. On Feb 12th, the New Zealand Minister of Primary Industries declared a medium-scale drought for the eastern coast of New Zealand’s South Island. Citing the dry weather, Fonterra drastically cut its ’14-’15 annual milk production forecast in late Jan ’15 from flat to a reduction of 3.3% from this season compared to last. More recently, Fonterra revised its ’14-’15 annual milk production forecast higher in late Mar ’15, but kept forecasted production 2.1% below last season’s levels. Accounting for Feb ’15 actual production, Mar – May ’15 production would need to decline 23.3% to match Fonterra’s current projection. Despite the recent deceleration in growth, ’14-’15 YTD New Zealand milk production remains up 2.4% YOY through the first three months of the production season.