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April 1, 2016

New Zealand Milk Season Not as Bad as Anticipated

 |  By: Fran Howard

As New Zealand’s production season begins to wind down, it is clear that one of the most intense El Niño events ever did little to impact the island nation’s milk production season. Likewise, even though New Zealand milk producers weathered some of the lowest milk prices in recent history, milk production has been better than expected.

After adjusting for Leap Year, February milk collections in New Zealand climbed 2 percent above a year ago to 1.97 million metric tons, according to data from the Dairy Companies Association of New Zealand. Season-to-date milk collections in New Zealand through February are now only 2.2 percent lower than the previous season. Early estimates from the Bank of New Zealand called for the country’s season-over-season output to be down by as much as 6 percent.

“From the outset of this production season, dairy producers in New Zealand have faced hardship in the form of low milk prices and mounting debt, and they were told to expect adverse weather,” says Sarina Sharp, agricultural economist with the Daily Dairy Report. “Despite this season’s strong El Niño, though, the weather in New Zealand was unexpectedly benign. Welcome rains arrived a few months ago, and summer pasture conditions are generally favorable.”           

Despite months of speculation that some of the lowest milk prices in recent history in New Zealand would force producers there to cut back on supplemental feeding and cull their herds aggressively, it appears that New Zealand producers could actually be purchasing supplemental feeds at record rates and the culling pace has fallen dramatically since the start of the 2015-16 milk production season.

Last year New Zealand imported a record-breaking 2.22 million metric tons of palm kernel, 10.3 percent more than in 2014 and 39 percent more than in 2013, according to Sharp. “Imports accelerated late last year, and all of the imported palm kernel will be fed to dairy cows eventually.” According to sources in New Zealand, there really is no other use for it, Sharp says.

In the first four months of the 2015-16 milk production season in New Zealand, cow and heifer slaughter was strong, up 33 percent from the comparable period a year earlier, according to data compiled by the Daily Dairy Report.            

“New Zealand does not report dairy and beef slaughter volumes separately, but this data suggests that New Zealand dairy producers culled aggressively early in the season,” says Sharp. “However, since then, it appears that the cull rate has slowed dramatically.”

Cow and heifer slaughter volumes for the October 2015 through January 2016 period dropped 9 percent below the prior year, putting season-to-date (June through January) slaughter 10.3 percent ahead of the same period in 2014-15.

“This is still an impressive season-to-season increase,” says Sharp. “But it is much smaller than the trade anticipated when New Zealand’s milk season began, and it does not support the notion that New Zealand dairy producers stepped up cull rates as the season progressed and producer milk price forecasts worsened.”

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