New Zealand farmer spend sees increased production per cow
New Zealand's 2018/19 season has started with a hiss and a roar, according to ASB bank, but increased spending more on pasture maintenance and animal health has increased production per cow.
It says that favourable weather has helped New Zealand production to date surge more than 5pc ahead of the same point last season.
Some of the reason for the healthy production numbers in annual change terms is that last season’s production was so weak, it says and, in particular, farmers did it tough with an overly wet spring and then drought over summer in some parts. This season so far the weather has been largely favourable, helping production start strongly.
Farmers have also been in a better position to take advantage of the favourable weather. Cashflows are positive and farmers are putting the dairy downturn behind them. Accordingly, farmers are spending more pasture maintenance (via fertiliser application) and on animal health, the report goes on to say.
"This spending has translated into more production per cow. With all this in mind, we have doubled our 2018/19 production growth forecast from 2pc to 4pc. Indeed, after three seasons of declining production, production is on track to set a new record high," it says.
Strong dairy production over recent months has also boosted GDP, the bank reports and says that agricultural production jumped 4.2pc over Q2, with dairy production making a large contribution to the pickup.
It also says it expects dairy export volumes to grow steadily over the coming year, after posting declines in three out of the last four quarters.
However, it warns that extra milk also means a lower milk price forecast. Last week, we also trimmed our milk price forecast by 25 cents to $6.25/kg.
"In net income terms, the higher production is not enough to offset the lower milk price. All up, we estimate farmer incomes are around $240m lower as a result of these forecast changes."
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