Inside Milk
New Zealand milk collection suffers damage
The milk supply in New Zealand shows a huge decrease towards the end of the 2019/2020 season. Milk production already declined sharply in February and there has been a further decline in March. Does this also offer room for higher milk prices?
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The milk collection for March amounts to 1,713 million tons, which is a decrease of 8,2% compared to the same period last year. This is the lowest milk supply for March since 2014. Compared to the 5-year average (for March), there is a decrease of 4,4%.
Change in February
New Zealand dairy farmers were in full swing at the start of this season; During that period, considerably more milking was done from month to month compared to previous years. For example, supply in January was still 7% above the 2018 level. In February, New Zealand was the extra liters of milk lost. It is now clear that the milk collection in the remainder of this season, which ends in June, will probably be (significantly) lower.
Just like 'neighboring country' Australia, New Zealand is also struggling with drought. This has a major impact on the availability of roughage, which forms the basis for the ration. There are also reports that dairy cows are often dried off prematurely. In addition, dairy farming has been struggling with Mycoplama bovis for some time.
Rabobank expects higher milk prices
The decline in milk supplies drives the Global Dairy Trade to higher levels. For example, the price of butter on the Global Dairy Trade has been on the rise continuously since November, while the price for skimmed milk powder is also rising. During the last auction, butter prices closed at $5.544 per tonne. This is not followed by butter prices in Europe, which have actually lost ground in recent months.
Rabobank expects that rising dairy prices, in combination with declining production, will provide room for higher milk prices. The main financier of New Zealand dairy farming expects an average milk price of $7,15 per kilo of solids for the coming season, which starts in July (1 kilo of milk solids is 11,5 liters of milk).
That is considerably higher than now; Fonterra's milk price for this season is between $6,30 and $6,60 per kilo of milk solids. Rabobank says that the dairy products, which originate from the continent of Oceania, are in demand on the world market.