Less milk and even higher milk price in New Zealand

New Zealand processors collected 2,32 million tonnes of milk in January, a drop of no less than 6% compared to the previous year. This made the decline even greater than in the previous months. Looking at the entire season - which started in June - the deficit is now 3,8%. The seasonal decline in milk production is clearly visible. In January, supply was about 10% below the level of the previous month.

Extreme drought
The increased decline in milk production is a result of the drought. The month of January was even the driest in twenty years on the North Island and the driest in seven years on the South Island. Because a lot of precipitation fell in December, the soil moisture content is not yet extremely low. Nevertheless, dairy farmers hope for early rainfall in order to obtain a good cut of roughage before the winter. A lot of rain is forecast in the coming days as a result of Cyclone Dovi making landfall. There is even a warning about flooding risks, which is obviously not conducive to good grass cutting. This extreme weather change is typical of New Zealand's bad summer. 

Meanwhile, Fonterra has revised downwards its expected supply figures for the current season. The cooperative now expects a year-on-year decline of 3,8%. According to CEO Miles Hurrel, this development contributes to the good sentiment on the global dairy market. This can also be seen in the Global Dairy Trade, which last week rose by 4,2%. A new auction round is planned for Tuesday, March 1. This can provide a good indicator of the extent to which the war between Russia and Ukraine is affecting the dairy markets. In Europe, the market was not upset the day after the war, although dairy companies are not happy about it either.

Milk price forecast higher again
In the meantime, the milk price forecast has become even more positive. This week, Fonterra raised its forecast for the fifth time this season. The latest forecast assumes a milk price between NZ$9,30 and NZ$9,90 per kilo of milk solids. This means a median price of NZ$9,60, which is 40 cents higher than the penultimate forecast, which was already a record. In Dutch standards this equates to well over forties.

The decline in milk supply is - in addition to bad weather conditions - due to a shrinking dairy herd, which has fallen to 4,8 million heads. Due to the high milk price, this decline now appears to be leveling off. In January, the number of cattle slaughtered was 10% below last year's level.