New Zealand Milk Production Update – Jun ’20
Executive Summary
New Zealand milk production figures provided by Dairy Companies Association of New Zealand (DCANZ) were recently updated with values spanning through May ’20. Highlights from the updated report include:
The May ’20 YOY increase in New Zealand milk production volumes was the first experienced throughout the past six months and the largest experienced throughout the past 16 months on an absolute basis. ’19-’20 annual milk production volumes declined 0.7% on a YOY basis however production on a milk-solids basis increased 0.3% YOY throughout the period. Recently experienced drought conditions, particularly on the North Island, impacted the milk supply throughout the ’19-’20 production season. COVID-19 has not impacted the milk supply to date as volumes are winding down seasonally but is likely to disrupt export supply chains throughout the second half of 2020.
Farmgate Milk Prices
Fonterra’s current ’19-’20 farmgate milk price forecast was reduced to a midpoint of $7.20/kgMS during May ’20, down from a midpoint of $7.30/kgMS, citing a softening of demand relative to supply. The ’19-’20 farmgate milk price forecast remains on pace to reach a six year high level. Fonterra announced an opening ’20-’21 farmgate milk price forecast of $5.40-$6.90/kgMS, with the wide range reflecting the heightened uncertainty surrounding the COVID-19 outlook. The opening price range was 50% larger than the previous year opening price forecast.
Cow & Heifer Slaughter
New Zealand cow & heifer slaughter rates declined 4.9% on a YOY basis during Apr ’20 when normalizing for slaughter days, finishing lower on a YOY basis for the second consecutive month. New Zealand cow & heifer slaughter rates had finished higher on a YOY basis over eight consecutive months prior to the recent declines. Apr ’20 dairy cow & heifer slaughter, which has more limited historical data available, also declined on a YOY basis for the second consecutive month, finishing down 8.9%.
’18-’19 annual New Zealand cow & heifer slaughter rates declined 0.7% YOY while finishing 2.3% below three year average figures, however ’19-’20 YTD slaughter figures have rebounded by 4.0% heading into the final month of the production season and are on pace to reach a four year high level.
New Zealand milk production volumes increased at a compound annual growth rate of 4.2% over the ten year period ending during the ’14-’15 record production season but have trended flat-to-lower over the four most recent production seasons as farmgate milk prices declined from the ’13-’14 record high levels and the New Zealand milk cow herd was reduced. USDA is projecting the New Zealand milk cow herd will decline slightly on a YOY basis throughout 2020 but remain above the six year low level experienced throughout 2017.
- New Zealand milk production volumes increased on a YOY basis for the first time in the past six months during May ’20, finishing up 4.3% and reaching a record high seasonal level. Production on a milk-solids basis increased 3.8%, also reaching a record high seasonal level.
- Fonterra announced an opening ’20-’21 farmgate milk price forecast of $5.40-$6.90/kgMS during May ’20, with the wide range reflecting the heightened uncertainty surrounding the COVID-19 outlook. The opening price range was 50% larger than the previous year opening price forecast.
- New Zealand cow & heifer slaughter rates declined 4.9% on a YOY basis during Apr ’20 when normalizing for slaughter days, finishing lower on a YOY basis for the second consecutive month.
The May ’20 YOY increase in New Zealand milk production volumes was the first experienced throughout the past six months and the largest experienced throughout the past 16 months on an absolute basis. ’19-’20 annual milk production volumes declined 0.7% on a YOY basis however production on a milk-solids basis increased 0.3% YOY throughout the period. Recently experienced drought conditions, particularly on the North Island, impacted the milk supply throughout the ’19-’20 production season. COVID-19 has not impacted the milk supply to date as volumes are winding down seasonally but is likely to disrupt export supply chains throughout the second half of 2020.
Farmgate Milk Prices
Fonterra’s current ’19-’20 farmgate milk price forecast was reduced to a midpoint of $7.20/kgMS during May ’20, down from a midpoint of $7.30/kgMS, citing a softening of demand relative to supply. The ’19-’20 farmgate milk price forecast remains on pace to reach a six year high level. Fonterra announced an opening ’20-’21 farmgate milk price forecast of $5.40-$6.90/kgMS, with the wide range reflecting the heightened uncertainty surrounding the COVID-19 outlook. The opening price range was 50% larger than the previous year opening price forecast.
Cow & Heifer Slaughter
New Zealand cow & heifer slaughter rates declined 4.9% on a YOY basis during Apr ’20 when normalizing for slaughter days, finishing lower on a YOY basis for the second consecutive month. New Zealand cow & heifer slaughter rates had finished higher on a YOY basis over eight consecutive months prior to the recent declines. Apr ’20 dairy cow & heifer slaughter, which has more limited historical data available, also declined on a YOY basis for the second consecutive month, finishing down 8.9%.
’18-’19 annual New Zealand cow & heifer slaughter rates declined 0.7% YOY while finishing 2.3% below three year average figures, however ’19-’20 YTD slaughter figures have rebounded by 4.0% heading into the final month of the production season and are on pace to reach a four year high level.
New Zealand milk production volumes increased at a compound annual growth rate of 4.2% over the ten year period ending during the ’14-’15 record production season but have trended flat-to-lower over the four most recent production seasons as farmgate milk prices declined from the ’13-’14 record high levels and the New Zealand milk cow herd was reduced. USDA is projecting the New Zealand milk cow herd will decline slightly on a YOY basis throughout 2020 but remain above the six year low level experienced throughout 2017.