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New Zealand water disaster will depress milk supply
Although the milk supply figures in New Zealand were still above the 2022 level in January, dairy giant Fonterra expects a turnaround soon. This as a result of Cyclone Gabrielle, which was devastating earlier this month. Farms have also been affected. In addition to the expected lower milk supply, Fonterra also expects a lower milk price.
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To start with the facts: New Zealand milk production in January was 2,35 million tonnes, an increase of 1,2% compared to the same month last year. In addition to a seasonal decline, market leader Fonterra expects less milk year-on-year in the coming months. This is due to the water disaster that recently occurred and left extensive damage, especially on the North Island. This is where the majority of milk production takes place.
Due to flooded weeks, milk collections could sometimes not take place, causing Fonterra to have to cancel shifts in the factories. The extent of the damage is left unclear. The dairy cooperative promises to financially compensate dairy farmers who have been affected. Remarkably, it is dry on the South Island, which also does not benefit milk production. Fonterra does not reveal the exact consequences for milk production, but a contraction in the coming months seems likely.
Milk price down
In addition to the expected lower milk production, the milk price forecast for the current season will also decrease, from $9 to $8,50 per kilo of milk solids. The decline is related to the recent decline in dairy market prices, including whole milk powder prices, which weigh heavily on Fonterra's milk price. Although Fonterra has recently noticed an increasing Chinese purchasing appetite, it is still too early to expect much from it.