Fonterra says New Zealand milk production up 6% in May

A cow in front of Fonterra Kauri plant
A cow in front of Fonterra Kauri plant

Charlotte Greenfield

Milk producer Fonterra said on Tuesday that its total New Zealand milk production increased 6pc in May, helped by favourable autumn weather conditions.

Australian milk production rose 4pc in April, the company said in a statement.

Global dairy prices have been undercut by increased production, and fell during a fortnightly auction last month as stronger supply muted what buyers were willing to pay for key products.

A further fall is likely in the next fortnightly auction, due later in the day.

Fonterra, one of the world’s largest milk exporters, said its New Zealand dairy exports rose 10pc in April, while its Australian dairy exports were up 16 percent.

Shares of the cooperative group were down about 1.1pc, as against an over 1pc gain in the New Zealand benchmark.

Global dairy prices fell for the second time in a row at its most recent fortnightly auction held as stronger supply muted what buyers were willing to pay for key products.

The GDT Price Index dipped 1.2pc, with an average selling price of $3,481 per tonne, in the auction held in the early hours of the morning, after slipping 1.3pc off nine-month highs at the previous sale.

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The result cast doubt on an earlier rally in prices that had prompted New Zealand dairy company Fonterra Co-operative Group Ltd , to lift its forecast payout prices to farmers in May. Prices were being dampened by a faster-than-expected recovery in supply in the world's largest dairy exporter,

New Zealand, which had previously seen bad weather hamper production from late 2017. In spite of robust demand, the added supply was muting prices, with skim milk powder (SMP) posting a 1.1pc decline, its first since April.

"Demand for SMP was strong. There was a greater volume sold at this event than at the previous event. But buyers were evidently not willing to pay more," said Amy Castleton, analyst at Agri HQ.

Whole milk powder, the most widely traded product, fell 1 percent, a slightly better result than futures markets had suggested.