Milk production in New Zealand will rise in 2017-18 for the
first time in three years, to judge by Fonterra projections, although volumes
will remain below record highs, amid some lingering financial worries in the
Fonterra, which processes the great majority of New Zealand's
milk output, in its first forecast for collections in 2017-18, which started
this month, pegged them at 1.575bn kilogrammes of milk solids.
That would represent an increase of 3.2% year on year, and end
a downturn in output which kicked in as tumbling milk prices deterred producers,
cutting milk values below the cost of production, and landing many farmers with
Fonterra's milk price to farmers dropped from NZ$8.40 per kilogramme
of milk solids in 2013-14 to NZ$3.90 per kilogramme of milk solids two seasons
However, values have since recovered to NZ$6.15 per kilogramme
of milk solids for last season, with a forecast payout by Fonterra of NZ$6.50 per
kilogramme of milk solids for 2017-18.
"The improved milk price environment should provide support
to farmers' milk production plans," the co-operative said.
Nonetheless, collections will remain below the record 1.62bn
kilogrammes of milk solids set in 2014-15, encouraged by momentum from the record
payout the previous season, with the nature of milk production enforcing a lag
in the effectiveness of price signals in influencing output volumes.
Indeed, earlier this week, real estate institute Reinz,
while seeing a 6.8% recovery in New Zealand dairy farm values over the past
year, flagged the prospect of forced sales.
"Financier-instigated activity… confirms recent comments
from the Reserve Bank that some farmers may struggle to cope with the debt
levels built up over recent seasons, with selling being the only option in such
Herd cuts curtailed
Still, New Zealand's recent milk production record has been
far better than had been expected, with Fonterra initially forecasting a 7%
slide in its collections for last season, more than twice the rate of decline
Last month, US Department of Agriculture's bureau in
Wellington hiked by more than 700,000 tonnes, to 21.9m tonnes, its forecast for
New Zealand milk production in calendar 2017, citing factors including benign
weather early in the year, besides higher milk prices.
Overall, recovering milk payouts are "boosting farmer
confidence, which will flow through to extra farm inputs being purchased if
necessary," the bureau said.
"In-milk cow numbers have not been reduced by nearly as much
as previously expected. At an estimated 5m head, this is 100,000 head greater
than had been previously forecast."