Pasture Growth Fuels Growth in Milk Production

NEW ZEALAND - A combination of pent up capacity to produce and an incredible period of pasture production has given rise to what some have called a “super flush of milk production”. From March 2011 right through to April 2012 pasture production has been above normal over much of New Zealand. A La Nina weather pattern has contributed to a distribution of rain which was frequent and even. Air temperatures were cooler than normal which improved pasture quality.
calendar icon 21 May 2012
clock icon 3 minute read

USDA Foreign Agricultural Service

Benefiting from the latter half of the golden production season, 2012 milk production is now projected to reach 19.9 million metric tons (MMT). This would put 2012 milk production five per cent ahead of 2011’s estimated record production level of 18.97 MMT, which in turn was 10.4 per cent higher than the previous year.

As a direct consequence of the projected increase in milk production, dairy product production is also expected to increase. There are no government intervention schemes and commercial processors don’t generally accumulate stocks to short the market. So, as production increases so too do exports. Because New Zealand has such a small domestic market, 96 per cent of total milk production in 2012 is likely to be processed into products for export.

For the PSD categories Whole Milk Powder (WMP), Non Fat Dry Milk/Skim Milk Powder (SMP), Cheese, and Butter, 2012 production is expected to reach a total of 2.37 MMT, up 7.8 per cent from the estimated 2011 production level of 2.19 MMT. Total exports of the above product categories are forecast at 2.3 MMT in 2012. Closing stocks are projected to increase by 13 per cent to close at 260,000 MT as processors adjust to the logistics required for the increase in production. This level of exports would be six per cent ahead of the 2011 total of 2.17 MMT.

As has been the case in the recent past, WMP production is likely to be the big mover. For 2012, WMP production is forecast at 1.24 MMT, 10 per cent higher than the 2011 production level estimated at 1.125 MMT. Exports of WMP will similarly increase in 2012, and are forecast at 1.22 MMT, 10 per cent ahead of 2011.

On the trade front, China has become a cornerstone market especially for the burgeoning WMP exports. An estimated 302,261 MT of WMP was shipped to China in 2011, accounting for 93 per cent of China’s total WMP imports for the year. WMP made up 65 per cent of NZ’s total volume of dairy product shipments to China in 2011. While the growth trend for WMP exports to China appears to have leveled off somewhat, exports of other product categories such as fats, Cheese, Liquid Milk, and SMP are still showing impressive upwards trajectories.

Exports to the US continue to be focused on protein ingredient products such as Milk Protein Concentrates, and Casein with fat shipments at useful levels. The US continues to be the second most valuable export destination for NZ dairy products, accounting for 6.6 per cent of total export receipts in 2011, with 2011 export revenues up 31 per cent compared to sales in 2010. This reflected the strength of dairy markets all round the world in 2011.

In 2012, the New Zealand policy and regulatory fields were dominated by the impending passage of amendments to the Dairy Industry Restructuring Act (DIRA) which sets the ground rules for the dominant player at processor level, the Fonterra Cooperative.

In addition, Fonterra is attempting to complete the third leg of its capital restructuring plan entitled “Trading Among Farmers” Implementation of the plan is dependent upon enactment of some of the changes proposed for DIRA. “Trading Among Farmers” would see Fonterra relinquish the onus of having to redeem or issue shares to farmers as their production falls or rises. Instead farmers would trade shares on an exchange among themselves as and when they chose.

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