How reduced production is impacting New Zealand

Published 7 February 18

New Zealand milk production for the June 2017-May 2018 season is expected to be down 1.5% on the year before, according to the latest forecast from AgriHQ. This would bring their 2017-18 production to around 20.4bn litres. Although the season-to-date production is up 0.4% on the year in milk solids terms, AgriHQ are anticipating milk intakes for the rest of the season (January-May) to be 4% below the same period last year. While wet weather impacted the start of the season, it is dry conditions that are the current issue.

2018.02.08 NZ production

This continued struggle with production has improved milk price sentiment in New Zealand.  NZX dairy futures for September 2018 and 2019 have lifted over the last month, and forecasts for the overall milk price for the 2017-18 season currently range from $6.20-$6.40/kg MS (approx. 29.5-30.5ppl) Additionally, the latest GDT Auction on 6 February saw a price index rise of 5.9%, with the WMP, SMP, butter and cheddar indexes all up by 7-8%.

With reduced production and upwards price pressure, New Zealand may find some competition on the export markets, particularly as other key exporting regions like the EU and US have had increased production this season. In Algeria, this is already manifesting: NZ WMP exports to the country were down 39% year on year for January-November 2017, while EU WMP exports to Algeria were up 116% for the same period.