March 18, 2019

Drought In New Zealand Could Curb Global Milk Supplies

 |  By: Anna-Lisa Laca

Despite recent milk market rallies, prices are still relatively low for the remainder of the year. Could a developing drought in New Zealand help the global supply and demand picture? One analyst says it’s possible.


“Everything developing in New Zealand right now will certainly help our milk prices here at home,” Alyssa Badger of Highground Dairy told AgriTalk host Chip Flory. “They've been dealing with a really bad drought, going on multiple weeks without rain. Droughts can develop really quickly over there.”


Fonterra, who represents 85% to 90% of the milk collection in New Zealand, expects milk production to fall 9% from February to me over prior year, according to Badger.


“It'll be the worst end to their season since the 2012-2013 market, so that's certainly going to cause some tightness,” she said adding that pasture conditions going into the new season will also be negative and could spur a rally in milk prices. “I don't think there's any way pasture conditions will improve and they're running low on silage as it is.”


New Zealand is split into two islands: North and South. Most of the country’s milk is produced on the North Island in the Waikato region. Most of that area is dry, she said. On the South Island where roughly 25% of the country’s milk is produced, conditions are worse.


“They have irrigating systems down there, and are a little bit more advanced, whereas the North Island depends a lot more on grass conditions,” she added.


Still as we head into spring flush, Badger said it’s hard to get too excited about milk prices.


“March, April and May are the strongest months for milk production that we have, so it's really hard to get excited or bullish about the market right now,” she said.