Milk flow positive for summer in the South

Hugh Stringleman NEWS Dairy

SEASONAL New Zealand milk production may be turning upwards, figures for December from Fonterra and the Dairy Companies Association show.

Milk solids production in December was 0.6% higher than in December 2021, only the second month-on-month increase since mid-2021.

Season-to-date figures remain in decline, down 2.3% in the period June 1 to December 31, Fonterra has reported.

The North Island is down 4.1% and the South Island up 0.8%, and for December the figures were minus 0.2% and plus 1% respectively.

The Dairy Companies Association of New Zealand (DCANZ) said the NZ dairy industry as a whole produced minus 3.4% in calendar 2022 compared with 2021.

Production in 2022 was 1.845 billion kilograms milk solids, the lowest in the past five years.

Fonterra accounts for a little under 80% of the NZ total.

In the latest Global Dairy Update, Fonterra commented that December weather was mixed with intermittent rain and warmer temperatures being conducive to pasture-growing conditions.

“Overall, disruptive rain throughout the middle of the month caused lower milk production, with a recovery and flattening towards the end of the month.”

Fonterra’s chief operations executive, Fraser Whineray, said the season-to-date decline in milk production would be hard to make up in only the four months remaining.

However, he pointed to the extra kick in milk production last March, after the summer dry, as farmers maximised the high milk price on offer.

The first half of the current season had a bias towards protein products, driven by the relative prices for product streams on global markets.

“The optionality in our product mix produced that increase in the earnings forecast,” he said.

In early December Fonterra increased the earnings forecast range, from 45-60c a share to 50-70c.

The latest Fonterra milk collection curve in the January 31 GDU shows that peak season in mid-October was around 78 million litres a day, 5-10 million litres below the two previous spring peaks.

Whineray said the lower daily intake enabled more product options, rather than running all plants flat out on milk powders to clear the daily volumes.

“Milk production this season has been largely a North Island story with too much rain and not enough sun and photosynthesis,” he said.

The Fonterra strategy expectation of slightly declining milk flows in future gave rise to changes in product mixes and some capacity closures, such as already announced for Brightwater, Nelson province.

ASB dairy analyst Nat Keall put the slight uplift in NZ production into a global context, particularly a European Union rebound.

In Europe, year-on-year increases of 1-2% were recorded in the monthly figures for September, October and November.

“NZ dairy production remains far below the highs reached in the 2021 season but is set to make some very tentative gains from here,” Keall said.

“The wet spring has seen pasture conditions look okay over the summer months, and we expect data over January and February will show modest improvements on last season.”

Input costs for EU farmers are easing and the energy crisis has not been as bad as feared.

“Global milk production remains below recent averages, but our sense is that supply is past its low point.

“Production from major dairy exporters remains constrained and will take some time to mount a substantial comeback.

“Plenty of challenges loom for producers too, with higher compliance costs, tough financing conditions and rising wage bills common themes in many jurisdictions, including NZ.”