1 | Page THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Date: GAIN Report Number: Approved By: Prepared By: Report Highlights: The second successive year of low dairy prices is taking its toll on New Zealand dairy farmers both financially and on herd numbers. Forecast milk supply is set to drop by two percent to 21.4 million metric tons in 2015. This is likely to be followed by a further fall in 2016 of three percent to 20.8 million metric tons. Both dairy production and exports will follow the same direction. David Lee-Jones Hugh Maginnis New Zealand Annual Dairy and Milk Supply Report 2015 Dairy and Products Annual New Zealand NZ1508 10/8/2015 Required Report - public distribution
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
1 | P a g e
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
POLICY
Date:
GAIN Report Number:
Approved By:
Prepared By:
Report Highlights:
The second successive year of low dairy prices is taking its toll on New Zealand dairy farmers
both financially and on herd numbers. Forecast milk supply is set to drop by two percent to 21.4
million metric tons in 2015. This is likely to be followed by a further fall in 2016 of three percent
to 20.8 million metric tons. Both dairy production and exports will follow the same direction.
David Lee-Jones
Hugh Maginnis
New Zealand Annual Dairy and Milk Supply Report 2015
Dairy and Products Annual
New Zealand
NZ1508
10/8/2015
Required Report - public distribution
2 | P a g e
Executive Summary
Note: the Marketing Year (MY) is the same as the calendar year (CY). For example in the report “2015” is used which
means the marketing year.
Low farmgate milk prices are now affecting New Zealand’s milk production. Even though, in the
absence of widespread drought, there was a stronger first half (H1) production for the 2015 year
(1.1% above H1 2014) this will not be enough to prevent milk production for the whole year
decreasing to an estimated 21.39 million(m) metric tons(MT). This will represent a 2.3% reduction
on the production in the previous year, 2014. Cow numbers are declining and are estimated in
October 2015 to be 75,000 head below the same time in 2014. The winter and early spring (June
to mid-September) for 2015 has been colder than the last two years. This has negatively affected
pasture growth. In order to minimize on-farm costs farmers are minimizing the rates of
supplementary feeding which is likely to impact on production for the second half of 2015 now
forecast to be 5% back on the same period in 2014.
Milk production in 2016 will continue to falter and is forecast at 20.75m MT, three percent below
the 2015 estimate. Low forecast milk prices; reduced cow numbers; and the prospect of an El Nino
drought are the dynamics at play.
Total dairy commodity and consumer goods production for New Zealand in 2015 is forecast to be
2.93m MT compared with 2014 at 3.05m MT. This amounts to a four percent reduction, which
reflects the forecast reduction in 2015 milk supply. Continuing this trend in 2016 it is forecast total
dairy production will reduce a further three percent to 2.86m MT. Total export volumes, although
buffered to some extent by ending stock reductions, will reflect the production drops by reducing to
3.03m MT (-0.5%) in 2015 and further in 2016 to 3.01m MT (-0.7%).
Less milk supply for 2015 through 2016; and the increased processing capacity now in operation
gives the dairy processors better product optionality. It will allow an increased volume of milk at
the margin to be switched from one product to another. This has already been evident in 2015 as
Cheese, liquid UHT milk, Casein, Whey products, and Milk Protein Concentrates have already
recorded increased export shipments. It will have even more of an effect potentially at peak milk
flow in October through early December in 2015 and 2016.
New Zealand’s key commodity produced is Whole Milk Powder (WMP) but at an estimated 1.38m
MT in 2015 this will be six percent below the 2014 total. As a direct consequence it is likely WMP
exports will also be down. They are now estimated at 1.36m MT for 2015, which would be 4.4%
below 2014. This slide is forecast to be halted in 2016 with both production and exports of WMP to
be essentially the same as 2015.
The other big mover in the main commodities is cheese. Production for 2015 is now estimated at
347,000MT, seven percent up on 2014. Year-to-date export data, shows cheese exports are 20%
ahead of the same period in 2014 and cheese prices during 2015 have been at enough of a
premium over WMP to justify extra production. Total cheese exports for 2015 are forecast at
319,000MT. This situation is likely to reverse in 2016 as the price relativity between WMP and
cheese starts to favour WMP again. For 2016, cheese production is forecast at 310,000MT and
exports back to 2014 levels at 278,000MT.
Milk Supply
3 | P a g e
2015
Stronger milk production in the first half of the year (1.1% above H1 2014) in the absence of
widespread drought combined with forecasts for the second half of 2015, which are lower than
previous estimates, will result in an estimate for milk production of 21.39 million MT. This is
virtually the same as the previous estimate for 2015 but represents a 2.3% reduction on the
production for 2014. The key factors which are driving production now are:
A second successive NZ production season of low farmgate milk prices. Fonterra, the
farmer owned Cooperative which collects approximately 85% of the milk has just improved
its forecast farmgate price for the June 2015 to May 2016 production season from
NZ$3.85/kg Milk Solids up to NZ$4.60. Only Tatua, the smallest Cooperative is breaking
with general price forecasts in the NZ$4 to NZ$5.00 bracket with a NZ$6.00 estimate. The
low prices are driving farmers to cut costs especially for supplementary feeding and off-farm
agistment of replacement heifers and cows between lactations. This will have a negative
impact on milk supply.
Cow numbers are declining. Even though a June 30, 2015 survey of in-calf dairy cows
suggested that numbers were 25,000 head above the number in 2014 the cow kill for 2015
is estimated to be 100,000 head or ten percent greater than 2014. The 2014 slaughter
total was historically high but within a range where herd numbers could be maintained.
Since June the cow kill has continued to be elevated and it is estimated that by October
2015 the number of cows actually being milked will be 75,000 head less than 2014.
The winter and early spring (June to mid-September) for 2015 has been colder than the last
two years. This has negatively affected pasture growth. In the absence of increased rates
of supplementary feeding it is highly unlikely milk production in the spring of 2015 will reach
the same levels as 2014. It is forecast that production for the 2nd half of 2015 will be five
percent back on the same period in 2014
2016
Milk production in 2016 will continue to falter and is forecast at 20.75m MT, three percent below
the 2015 estimate. The factors mentioned for 2015 will continue to drive milk production in 2016
with one addition:
Drought: most meteorological services are predicting a strong El Nino weather pattern over
the next six months. For New Zealand this often means drought conditions on the east
coasts of both islands and may mean drought in the Waikato which still produces
approximately 30% of the country’s milk. At this stage assumptions for milk supply in the
first half of 2016 allow for a medium level drought event but not generalized drought
conditions over the whole country.
The continuing themes from the 2015 will be likely to play out in the following ways:
Reduced cow numbers: The full extent of reductions to the dairy herd won’t be completely
felt until the second half of 2016. It is forecast that dairy cow numbers will be reduced by
4 | P a g e
100,000 head to 5.10m head at June 30, 2016.
Milk prices: Unless farmers get plenty of warning of a significant milk price increase (to
somewhere around NZ$6.50/kg MS) for the 2016/17 production season the combination of
reduced cow numbers and continued minimization of spending on supplementary feed is
likely to mean production in the second half of 2016 will be similar to the same period in
2015 if not less.
Milk, Cow, Milk Price Trend Chart
Source:
Post Estimates, DairyNZ
5 | P a g e
PSD Milk
Dairy, Milk, Fluid (1000HD, 1000MT)
2014 2015 2016
Market Year Begin: Jan 2014 Market Year Begin: Jan 2015 Market Year Begin:
Jan 2016
New Zealand Official Old Post
New Post
Official Old Post
New Post
Official New Post
Cows In Milk 5264 5264 5175 5200 5214 5200 5100
Cow’s Milk Production 21893 21893 21893 21675 21410 21391 20745
Other Milk Production 0 0 0 0 0 0 0
Total Production 21893 21893 21893 21675 21410 21391 20745
Other Imports 2 2 2 2 2 2 2
Total Imports 2 2 2 2 2 2 2
Total Supply 21895 21895 21895 21677 21412 21393 20747