WELLINGTON: Milk production in New Zealand, the top exporter, will fall in 2016 for a second successive year, the first back-to-back drop in output since the 1970s, dented by the knock-on effects of low prices and poor weather.
The US Department of Agriculture bureau in Wellington, in the latest of a series of downgrades by commentators to estimates for New Zealand milk output, trimmed its forecast by 19,000 tonnes to 21.39m tonnes for 2015, a drop of 2.3% year on year.
The downgrade reflected expectations of a 5% drop in the second half of the year for output in the top milk exporting country, as low prices prompt farmers to reduce herds and cut supplementary feeding – at a time of cooler weather too.
“The winter and early spring, June to mid-September, for 2015 has been colder than the last two years,” the bureau said, adding that “this has negatively affected pasture growth”.
And New Zealand milk output in 2016 “will continue to falter”, the bureau said, falling a further 3.0% to 20.747m tonnes. This would be the first time since 1973-74 that New Zealand production has fallen for two successive calendar years. Besides the disincentive provided by low prices, the bureau also flagged the prospect of weather setbacks to the El Nino.
“For New Zealand this often means drought conditions on the east coasts of both islands and may mean drought in the Waikato which still produces approximately 30% of the country’s milk.” However, the impact of lower milk production will not be felt equally between all the major milk products with, for example, output of whole milk powder, a key product, set to remain steady, while that of cheese declines.
“For 2016, whole milk powder production is likely to hold at 1.38m tonnes as profitability returns to whole milk powder manufacturing, even though overall milk supply is decreasing,” the bureau said.
New Zealand’s exports of whole milk powder will, at 1.36m tonnes next year, hold steady, after a 4.4% drop in 2015. “Milk supply may be decreasing but the likely recovery in demand/market price for whole milk powder will probably mean whole milk powder consumes a greater share of the milk supply in 2016,” the bureau said. By contrast for cheese, output, having risen 7% this year, encouraged by an unusually strong premium over whole milk powder, will slump by 11%.
“The slowdown in milk supply in 2016 and the likelihood other commodity price relativities will catch up with cheese is likely to mean production in 2016 will be reduced,” the bureau said. “With less milk supply in 2016 and the likelihood of increased whole milk powder pricing it is expected cheese exports will reduce broadly in line with production decreases.”
