Linked In
News In
Linked In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Fonterra slashes hopes for growth in New Zealand milk volumes

Twitter Linkedin eCard

Fonterra cut its forecast for milk collections in New Zealand, the world's biggest exporter, after wet weather extended the poor start to the season, in a potential support to world dairy prices.

Fonterra - which processes the vast majority of New Zealand milk production, making its forecasts a proxy for the country's overall fortunes – lowered by 35m kilogrammes of milk solids, to 1.54bn kilogrammes of milk solids, its forecast for it collections in 2017-18.

The forecast slashed to 0.9%, from 3.2%, growth in collections expected for the season, which ends in May next year.

And it reflected the continued drag on milk output from unduly wet weather.

"Weather conditions in August and September have impacted milk production across most of the country," Fonterra said, reporting slowdowns in both New Zealand's North and South islands.

Indeed, the co-operative's collection volumes in September fell by 1.1% year on year, dragging volumes so far in 2017-18 below year ago levels.

Weaker flush?

The Fonterra downgrade comes at a critical time for New Zealand milk output which is around its seasonal high, amid the so-called "spring flush" in production.

And it contrasts with expectations of many commentators - such as Rabobank, which two weeks ago forecast milk output growth of 2.5-3.5% this season – that the incentive provided by firmer markets would underpin expansion.

Indeed, Fonterra's downgrade is even more severe than one last week by Bank of Zealand, which cut its estimate for output growth to a "1-2% range, rather than a 3-4% range".

Bank of New Zealand noted that "milk production is ramping up in spring, but we suspect it will not be quite as strong as it usually is given recent weather conditions."

Price prospects

The bank added that New Zealand's weaker milk output prospects looked like tempering prospects for growth in the country's dairy export volumes this season "by a couple of percentage points".

In value terms, "moderate growth in exports… is still expected as more milk continues to get directed towards higher value products".

The bank added that "less growth in New Zealand milk supply should offer some support for dairy prices", which will be tested on Tuesday at the next GlobalDairyTrade auction.

While prices "unexpectedly fell" at the last auction, two weeks ago, "this particular result may reflect Golden Week holiday in China", the world's top dairy-importing country.

By Mike Verdin

Twitter Linkedin eCard
Related Stories

Evening markets: Calendar and dollar revival provoke ag market reversal

For cotton futures, that means a higher close, but the likes of soybeans and corn struggle. Coffee futures maintain downward trajectory

Deere lifts sales hopes - even as it unveils biggest loss in 25 years

The maker of John Deere tractors flags "strengthening" market conditions, but swallows a huge writedown prompted by US tax retorms

Plant Impact agrees takeover by Croda, after failure of Bayer contract

The crop enhancement group, floored by the failure of a supply deal with Bayer, agrees a takeover by a maker of chemicals from anti-wrinkle creams to floor coatings

Morning markets: Year of the dog starts broadly positive for ags

That is, what movement there is is largely upward. But the lunar new year is not the only calendar factor to watch out for...
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069