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New Zealand milk collection falls in first half

Fonterra tipped to pay $6.50/kgMS this season.

Rebecca Howard
Thu, 22 Dec 2016

Bad weather had hit Fonterra's New Zealand milk collection, which is down  5.7% on the year in the six months to November 30.

The tighter supply in some regions such as New Zealand has helped shore up global dairy prices, eroded in the past few years by oversupply and weak demand. Dairy prices have risen more than 75% since July, leading Fonterra to hike its milk price forecast last month to $6 a kilogram of milk solids for the current season, compared with $3.90/kgMS last season.

Prices eased 0.5% in yesterday's GlobalDairyTrade auction but the result is expected to have little impact on Fonterra's forecast. ASB Bank senior rural economist Nathan Penny today said the dip was marginal and he now tips Fonterra to pay $6.50/kgMS this season as "we expect lingering global production weakness to support dairy prices well into 2017."

In its latest global dairy update, the world's biggest dairy exporter said milk collection was down 7.8% on the North Island over the six-month period and down 1.8% in the South Island. Its milk collection across Australia for the five months to Nov. 30 was 9.4% lower than it was in the same period a year ago. Fonterra is forecasting that New Zealand milk collection will be down 7% in the 2016/17 season.

Regarding its main markets, Fonterra pointed to a pickup in demand for China with imports up 26%, or 468,000 metric tonnes, in the 12 months to October compared to the same period a year earlier. "Strength in China dairy imports numbers is driven by fluid and fresh dairy up 60%, infant formula up 37%, whey powder up 17% and whole milk powder up 14%," it said.

In the 12 months to August, Asian and Latin American import growth continued but imports to the Middle East and Africa remained soft, it noted.


Rebecca Howard
Thu, 22 Dec 2016
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New Zealand milk collection falls in first half