Milk Monitor

Great start to season

By Gerald Piddock

Each month the milk monitor delves into the dairy industry and gives us the low-down on the good, the bad, the ugly and everything in between.

The 40c lift Fonterra dairy farmers backed this with demand out of North received last month has put the Asia for most commodities increasing icing on the cake for what has over the past two auctions. been a great start to the season It prompted Westpac to lift its forecast production-wise. from 6.50-$7/kg MS due to better than

The latest data from the Dairy expected dairy demand. Companies Association of New Zealand “In particular, the Chinese economy showed production was up 1.6% on a has rebounded strongly post-covid. The tonnage basis and 1.8% on a milksolids Chinese economy is on track to post basis in September compared to the modest growth over 2020, the only major same month a year ago. global economy likely to do so,” Westpac

For the season to date, NZ milk senior agri economist Nathan Penny says. production was up 3% on a tonnage “In addition, economies in other key basis and 2.9% on a milksolids basis. The dairy markets in Asia are also faring better country’s production for the 12 months than expected. to July was up 0.1% and up 0.9% on a “More broadly, New Zealand milksolids basis. agricultural exports, including dairy, have

Global analytics company Fitch proved more resilient than we expected Solutions forecasts a modest growth earlier in the year. in New Zealand’s dairy production this “In this vein, we now expect global season, while Rabobank senior dairy dairy prices to hold at or around current analyst Emma Higgins believes it could levels over the remainder of the season.” range between a flat growth to a modest Contrasting this mostly bullish outlook 2% lift compared to last season. towards China is Rabobank’s report on

“We are anticipating a new production Southeast Asia. record to be set for October, the peak In it, RaboResearch senior dairy analyst month of milk collections – a culmination Michael Harvey says dairy companies of the warmest winter on record and will be pushed towards dairy export largely benign spring conditions,” she opportunities into ASEAN-6 countries by says in the bank’s latest dairy quarterly. rising geopolitical tensions and receding

Fonterra chief executive Miles Hurrell demand tailwinds in China. says the stronger forecast had been He says while dairy trade has largely largely driven by improved demand in been immune so far, there has been a China. notable deterioration in trade relations,

“Despite the initial impact of covid-19, which has the potential to reverberate far we have seen demand for dairy in China and wide. recover quickly,” he says. “Slowing Chinese dairy demand is a

“In particular, demand for whole milk further factor which will prompt dairy powder, which is a big driver of milk price, exporters to look at markets outside has been stronger than expected.” China, with this expected to ease over the

Likewise, Fonterra’s head of commodity next decade as the rate of growth in per trading David McGowan told a recent capita income slows,” Harvey says. NZX Global Dairy seminar that the dairy He says these factors would likely market outlook “remains really strong”. compel dairy exporters to reassess their

He says while there have been export growth strategies and consider disruptions, the market has moved increased investment in the ASEAN-6 through them “remarkably well”. region.

China, he says, will remain the “import “This is particularly relevant for New powerhouse,” with dairy imports lifting Zealand dairy companies who are more 4% a year. trade-exposed versus their peers and,

The most recent GDT events have consequently, have the highest level of Things are looking rosy for the dairy industry as farmers head into peak milk.

market concentration risk,” he says.

Now was a good time for dairy companies to evaluate their portfolios to determine if they are overweight in China with over 35% of NZ dairy trade bound for China and less than 20% heading to Southeast Asia, he says.

Closer to home, all eyes will be turning to the sky over the next month to see if the weather Gods are kind as farmers hit peak milk and into early summer.

South Island farmers should be less affected by the forecasted La Nina pattern expected for summer thanks to their ability to irrigate. Its impact on North Island farmers could be both positive and negative.

While some parts of Waikato and Northland are already looking dry, La Nina could see widespread rain in the northern and eastern parts of that island keeping production ticking over nicely.

If other dairy producing areas turn dry, farmers still should have the cash to buy in feed thanks to the decent forecast.

Most have already planned for their summer. Anyone who has driven around Waikato in the past month would have seen contractors and farmers on their tractors getting feed crops sown and silage cut.

It also looks as if the concerns many had over labour shortages among contractors have largely been avoided, meaning there should be plenty of homegrown feed for autumn.

It’s been a great start to the season so far and a continuation of a great spring will top it off. n