Milk production in New Zealand will rise by more than had been
expected this season after rains eased doubts of a return of the drought which ended
a run of rising output in the top exporting country.
Auckland-based Fonterra, which collects the vast majority of
New Zealand milk, raised to 6.4%, from 5%, its forecast for national milk
production growth in the season to the end of May.
The upgrade - which lifted by 15m kilogrammes of milk solids
to 1.556bn kgMS the estimate for full-season output - comes despite a slowdown
in growth in the co-operative's own milk collections last month.
Fonterra took in 210m kgMS in milk in November, a rise of
1.6% year on year, well below the rate of increase of 4.7% the group witnessed
in the first five months of the season.
The slowdown came amid signs of emerging dryness which had
threatened pasture condition, and evoked memories of the early-2013 drought,
billed as the worst in a generation, which ended a run of rising milk output.
New Zealand milk output fell in February, year on year, for
the first month since late 2010.
However, "late-November rains were welcomed by farmers
beginning to experience low soil moisture conditions," Fonterra said.
"More rain has come into mid-December driving pasture growth
leading into the summer period."
Fonterra added that elevated milk values were also
underpinning milk output prospects, in incentivising farmers to maximise performance,
even though the co-operative revealed earlier this week that it would likely
not this season pay producers the full $9.00 per kgMS for milk suggested by its
The group blamed the pricing decision on its inability to
lift beyond 70% the proportion of milk going into powder, for which values are
especially strong, leaving it exposed to the relatively weak cheese and casein markets.
"While there remains a risk that dry conditions through
summer will again impact milk supply, the record milk price forecast provides
additional confidence that milk supply will increase above [the previous] estimate,"
Supply and demand
The New Zealand milk volume upgrade comes against a
background of rising output in other major producing countries too, with the
notable exception of Australia, where output is down 4.1% in 2013-14, up to
"With the exception of Australia, the key southern
hemisphere exporting countries of Argentina, New Zealand and Uruguay continue
to see strong year-on-year growth with weather conditions resulting in good
pasture and feed growth," Fonterra said.
There is also a "continued recovery in milk production in
the top four exporting countries in the northern hemisphere", although these
are now in the winter months when output slows dramatically.
However, demand is rising too, underpinning a rise in prices
of 52% year on year at the group's GlobalDairyTrade auctions.
"Milk production in China and Russia has been declining and
this has underpinned a surge in dairy imports," Fonterra said.