Fonterra is warning it is expecting to miss forecast milk production growth this season because of drought."We will certainly not get anywhere near the 2-3 percent (forecast) growth," Fonterra general manager milk supply Tim Deane told Reuters.A
Fonterra is warning it is expecting to miss forecast milk production growth this season because of drought.
"We will certainly not get anywhere near the 2-3 percent (forecast) growth," Fonterra general manager milk supply Tim Deane told Reuters.
About half of Fonterra's milk comes from farms in the upper half of New Zealand's North Island, where drought has been declared in several key production areas.
Deane said it was too early to say what the impact would be on the co-operative's full season, which ends on May 31, because there had been strong growth in South Island dairy farms.
"We don't know exactly where we will end up for the entire season. The additional production in the South Island has helped compensate for the drop in the North Island," he said.
But Deane said the current situation was not as bad as the drought in the 2007
2008 season, when drought slashed more than $NZ1 billion off the economy.
"We are dropping at the same rate as we dropped in 2007- 2008 drought. The difference is this drop started a few weeks later. We are on the same trajectory now," he said.
Fonterra is owned by about 10,500 farmers and controls about a third of the world's dairy exports.
It generates more than 7 percent of New Zealand's gross domestic product and has annual sales of around $NZ17 billion.
A currency strategist said that the New Zealand dollar, which is often sensitive to the level of production or export prices for the dairy sector, has already factored in a likely fall in production.
"That's part of the reason why the NZ dollar has lagged gains in some of its commodity peers like the Aussie and the Canadian dollars," said Bank of NZ strategist Mike Jones.
Last week Fonterra reported a 21 percent rise in milk powder prices at its latest auction as demand rose on the back of tight supply.
