Milk increase in New Zealand explodes

The New Zealand milk supply shows a remarkable movement in November. In the period from July to September, milk supply was up by almost 6%, compared to the same period in 2017. And production in October was also 5% higher (3,2 million tons).

However, in November the milk pool only grew by 1% to approximately 2,9 million tons, compared to the same months in 2017. Compared to the 5-year average, the increase is less than 1%. 

Fewer cows 
The declining growth is related to the contraction of the dairy herd in New Zealand. The number of animals has shrunk by 1% to 6,4 million in the past year. In 2014, the country was still at 6,7 million animals, which was a record. In that year the milk supply also turned out to be higher than now for the last time.

The (dairy) livestock industry in the country has been struggling with the animal disease for a long time Mycoplasma bovis, resulting in the culling of thousands of cows. In that sense, the slight shrinkage of the dairy herd is not too bad.

Westpac raises milk price forecast
Initially, the Global Dairy Trade (GDT) reacted negatively to the milk increase in New Zealand. Between June and mid-November, the auction continued to decline. 'Coincidentally' prices have been dropping again since mid-November increase and that trend continues into the new year. 

This move is the reason for the New Zealand bank Westpac to increase the milk price forecast for the current season by 0,20 New Zealand dollar ($) to $6,30 per kilo of milk solids. This forecast is in line with the milk price of Fonterra.

The rebound in the market is coming faster than expected, according to the bank. The reason for this is the demand for dairy products from China. Westpac expects dairy prices to continue to rise in the coming months; provided that the Chinese buying impulse continues. Still, the bank is skeptical, because it is not certain whether China will remain in the market.