New Zealand Milk Production Update – May ’15
According to Dairy Companies Association of New Zealand (DCANZ), Mar ’15 New Zealand milk production remained lower on a YOY basis for the second consecutive month, finishing 0.9% below the previous year. Monthly production also declined 15.1% MOM on a daily average basis as production continues to decline seasonally. The 15.1% February – March decline in production was slightly less than the five year average 16.6% decline over the same period. New Zealand milk production has been tempered of late due to lower Farmgate Milk Prices and dry conditions. In late Apr ’15, Fonterra revised its forecasted Farmgate Milk Price for the ’14-’15 season from $4.70/kgMS to $4.50/kgMS, noting the continuing and significant volatility in international dairy commodity prices caused by over-supply in the market. The reduction in the forecasted Farmgate Milk Price was the fourth experienced since May ’14. In Feb ’15, 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, however declines in YOY milk production have been far less than anticipated in recent months. Fonterra revised its ’14-’15 annual milk production forecast higher in both Mar ’15 and Apr ’15, with current ’14-’15 production projections 1.5% above last year. Accounting for Mar ’15 actual production, Apr ’15 – May ’15 production would need to decline 5.0% to match Fonterra’s current projection. According to Fonterra’s April Global Dairy Update, rain in March was consistent with long-term averages, however dry conditions remain across most dairying regions and follow-up rain is needed to hold milk production in line with last year over coming months. Despite the recent deceleration in growth, ’14-’15 YTD New Zealand milk production remains up 2.1% YOY through the first 10 months of the production season.