Handbrake yet to be pulled on Kiwi milk production

Most parts of New Zealand have had good rain this summer despite predictions of drought due forecast El Niño weather conditions.

Indeed, according to Rural Economist Nathan Penny, green is the countryside’s summer colour of choice, even in areas like the East Coast where brown is normally the summer vogue.

“The good New Zealand growing conditions over summer have come as a surprise. Weather analysts had labelled this El Niño as one of the strongest in recent memory.

“And, we had thought the low milk price combined with a dry summer would slam the brakes on New Zealand milk production.”

Instead, Penny says good growing conditions now mean the Kiwi production slowdown is happening at a more gradual pace.

In an oversupplied global dairy market, gradual is not fast enough, he says.

Global Dairy Trade

At this weeks, Global Dairy Trade auction overall dairy prices fell 7.4% for the third successive 2016 auction, in line with expectations.

WMP paced the fall, dipping 10.4%. SMP prices fell 2.2%, while AMF and butter fell 6.6% and 8.3%, respectively.

According to Penny, the dip follows surprisingly good New Zealand weather with production holding up better than expected.

“Indeed, the relatively large WMP fall, compared to SMP for example, fits with this result being a (better) New Zealand production story.

“With that in mind, we have lifted our milk production forecast for this season to 3% below last season from our previous view of 6% below,” he said.

Penny says earlier fears of a summer drought, owing to the strong El Niño weather pattern, have largely receded.

He says with shock-effect of an El Niño drought largely removed, the risk is that global production may hold higher for longer than previously thought.

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