November 18, 2016

Markets Ignore Massive New Zealand Quake

 |  By: Anna-Lisa Laca

Earlier this week New Zealand’s South Island was struck by a mega earthquake, measuring 7.8 on the Richter scale. New Zealand is the largest milk exporter in the world so many wondered if markets would be affected by the quakes impact. Some areas were hit hard. In Kaikoura, a farming and tourist region at the top of the South Island, cows were stranded on cliffs, rotary parlors were knocked off their rockers, roads literally shifted and farmers went without power. Still markets should feel no impact of the quake, according to Nick Buyse a market analyst with INTL FCStone.

“We don’t expect it to cause any substantial repercussions to the markets,” Buyse says. “There is some short term issues with the milk handling logistics, but it sounds like that’s in isolated areas.”

Early Monday morning Fonterra, the largest cooperative on the island nation, reported all of their facilities were in sound working condition and would continue to operate. That news came as a surprise to many considering several Fonterra facilities were close to the epicenter of the quake, including their main cheese facility which is only 60 km away. Still, some farmers had to dump milk.

“Due to road conditions some farmers in the Kaikoura and North Canterbury area may not have their milk collected as normal and electrical outages meant that some farmers were not able to milk cows and had to dispose of milk,” Buyse says.

Fortunately, on a volume basis the majority of New Zealand’s milk production is on farms further to the south. Those farms continued production without a hiccup, a far cry from the last massive earthquake New Zealand farmers had to deal with in 2011. At that time, many farms were out of operation for several days.

A decline in New Zealand milk production was on the horizon before the quake, according to a New Zealand news website.  They report farmers there haven’t been able to produce adequate grass because of a “big wet” season.

As many hoped, this week’s Global Dairy Trade auction was up, however analysts say the earthquake had nothing to do with it.