Fonterra milk collection drops 10% in first month of 2017 season

Thursday 14th July 2016

Fonterra Cooperative Group's New Zealand milk collection dropped 10 percent in the first month of the 2017 season, a period when production is typically at a low.

The Auckland-based dairy cooperative collected 9.9 million kilograms of milk solids in June, down from 11.1 million kgMS in the same month a year earlier, Fonterra said in its monthly Global Dairy Update. North Island collection fell 6 percent to 7.6 million kgMS while the South Island dropped 22 percent to 2.3 million kgMS.

"The change in production comes at a time of year when milk production is at a seasonal low, with most farmers having dried off in preparation for spring calving," Fonterra said.

Australian milk collection sank 26 percent to 6 million kgMS in June from a year earlier, and Fonterra said milk production "continues to be heavily impacted by the reduction in Australian milk prices to align with global dairy prices."

The slow start to the season comes at a time when farmers have culled livestock to cope with a slump in global dairy prices, and today's update shows total New Zealand production fell 2 percent in the 12 months ended May, with a 4 percent increase in the final month of the 2016 season as favourable weather supported a late lift in the season.

Global milk supplies have been slowing in some regions, though European and US farmers are still increasing their production. That increased production has outpaced demand, keeping a lid on dairy prices, and prompting processors to cut the prices they pay to farmers.

Fonterra said it exported more than 210,000 tonnes from New Zealand in June, which reflected "the successful performance of our direct-to-customer ingredients sales, despite the tough global market".

The dairy processor said the 2017 financial year will start with "a much tighter stock position" for global ingredients than in recent years due to the forecast reduction in milk supply and lower inventories.

Fonterra Shareholders' Fund units increased 0.4 percent to $5.47, having dropped 9 percent so far this year.

BusinessDesk.co.nz

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