Milk production in New Zealand, the top dairy exporting country,
defied expectations by increasing again, even as the government heightened its
response to a drought viewed as the worst in some 30 years.
New Zealand milk production reached 2.30m tonnes in January,
a rise of 4.3% year on year, industry group Dcanz said.
The figure extended an unbroken run of output rises heading
back to 2010, and defied widespread expectations of damage from dry conditions which
set in late last year in the North Island, and are spreading to South Island
Auckland-based Fonterra itself, the world's biggest dairy
exporting company, last month cautioned that "dry weather conditions,
particularly in the North Island, in mid-December and January resulted in a
slowdown in milk supply growth".
Expectations of a drop in New Zealand milk output have been a large support to world dairy prices, which hit a 21-month high this month at GlobalDairyTrade auction, with values supported by expectations of a drop in European output too in the first half of the year.
'Very difficult dry
The Dcanz data came even as the New Zealand
government declared drought through the whole of North Island.
"It has become clear that nearly all farmers in every part
of the North Island are facing very difficult dry conditions," Nathan Guy, the country's
minister for primary industries, said, unveiling extra funds for support
Agrifax, the New Zealand-based consultancy, warned that soil
moisture levels are 50mm below normal across most of the country, with a
deficit of more than 130mm in some major dairying areas, including Northland,
Auckland and Waikato.
"Rainfall levels across much of the North Island were only
a-third-to-a-half of their summer norm," Agrifax said.
Indeed, commentators remain downbeat on prospects for New Zealand dairy
output, forecasting a particularly steep seasonal dip heading into winter,
given the impact of the drought on pasture condition, at a time of high prices
of brought-in feed.
Rabobank said that that "national production [is] slipping
below the prior year on a monthly basis through February", adding that, with little
rain in the forecast, producers were "very unlikely" to revive milk production
to typical rates for the rest of 2012-13, which ends in May.
Furthermore, with the dry weather encouraging early cow
slaughter ahead of the seasonal low point in output, "the impact on milk supply
over the remaining three months of the season will be irreversible", the bank
New Zealand milk production typically tails off to a nadir
in June, with the last three months of last season responsible for some 20% of