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Saturday 20 October 2018

Fonterra's New Zealand Jan milk production falls 5% on poor weather

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

FarmIreland Team

Fonterra said on Friday its domestic milk production in January had fallen 5pc year-on-year, which could be seen as a boon for global dairy prices as New Zealand is the world’s largest dairy exporter.

The fall in production came on the back of unsupportive weather, the dairy producer said in statement.

“Although rain in late December and early January helped in some regions, other regions were heavily impacted by soil moisture and pasture growth challenges,” Fonterra added.

Milk production in Australia surged 4pc in the same period.

Global dairy prices have seen some weakness lately, with prices slipping for the second time in a row at a fortnightly auction held this week, as an influx of supply from New Zealand curbed buying.

Whole milk powder (WMP), the most widely traded item, fell 0.8pc after New Zealand dairy giant Fonterra increased the amount of powder on offer, though that was still a better result than the 2.5pc drop expected by derivatives markets. 

 "Fonterra had increased its WMP offer volumes ahead of this event as milk flows start to improve, so buyers are unlikely to feel as much urgency to secure product," said Amy Castleton, dairy analyst at AgriHQ.

Wetter weather in recent weeks led to a more favorable outlook for supply, which meant further price gains were likely to be muted.

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"From here, we expect prices to ease further through to the end of the season. We expect NZ production to improve on the back of the increased rainfall. In turn, this improved production should put modest downward pressure on prices," said Nathan Penny, ASB economist.


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