New Zealand Milk Production on the Rise

NEW ZEALAND - New Zealand’s dairy sector has recovered from last year’s devastating drought and milk production is comfortably ahead of last year.
calendar icon 13 February 2009
clock icon 2 minute read

USDA Foreign Agricultural Service

Pasture conditions, weather patterns and herd numbers suggest the industry is on track to produce 8 per cent more milk in MY 2008/09 (June 1/May 31 year) reaching a record 16.35 million metric tons, reports a USDA Foreign Agricultural Service GAIN Report. However, the continued slide in dairy commodity prices, drop in export levels, and build up in stocks are a growing concern for the New Zealand dairy sector and the New Zealand economy. Dairy exports account for over a quarter of New Zealand’s total merchandise exports and approximately 7.5 per cent of GDP.

New Zealand dairy export volumes fell 9 per cent during the first seven months of MY 2008/09 compared to the same period last year. The biggest falls were in cheese, butter and butter oil, and whole milk powder; down by 21 per cent, 10 per cent and 4 per cent, respectively. The drop in export volumes has resulted in a supply chain problem for Fonterra, New Zealand’s largest dairy cooperative.

According to Agricultural Affairs Office estimates, New Zealand’s inventories of dairy products have nearly doubled since mid-year 2008 to somewhere in the range of 340,000 to 370,000 metric tons. However, in recent media reports, Fonterra executives have signaled that inventories have turned the corner and are now being run down.

On January 28, 2009, Fonterra announced a 90 cent reduction in its projected payout price to NZ $5.10, down from a revised forecast of NZ $6.00 in November and an initial forecast of NZ $7.00. The new payout of NZ $5.10 compares to the 43-year inflation adjusted high of NZ $7.90 paid out last season. Fonterra pointed to the global oversupply of milk and the weak global economy as reasons for the decline in the projected payout.

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