Low farmgate prices could result in lower production in New Zealand

Published 1 June 15

Fonterra have reduced their forecast farmgate milk price for the 2014/15 by a further NZ$0.10 per kilogram of milksolids (kgMS) to NZ$4.40/kgMS. Due to the continued global oversupply of milk and dairy products, Fonterra’s forecast farmgate milk price is now 37% lower than the estimate at the start of the season.

Total milk deliveries for the 2014/15 season, which ended on 31 May, are expected to be 2% higher than the previous season. This is a result of high production in the first seven months of the season. Production at the turn of the year fell below last years’ levels, largely due to dry weather conditions. Although, since March conditions have eased resulting in production rising above 2014 levels again.

However, throughout the rest of 2015 production is expected to fall below 2014 levels. Going into the New Zealand spring (Aug-Dec) it is estimated that the milking herd will have 50,000 fewer cows than the previous year. In addition, analysts from the USDA have suggested that milk yields may be lower. This is due to low milk prices meaning that farmers are unwilling or unable to spend money on supplementary feed as they have done in previous years.