New Zealand Milk Production Forecast to Decline

NEW ZEALAND- Milk production is predicted to decline modestly in 2013 whilst whole milk powder exports are expected to increase, says the USDA Foreign Agricultural Service.

31 October 2012

3 minute read

Oceania

Excellent pasture growing conditions that have supported impressive gains in dairy production over the past 18 months are not expected to carry on indefinitely. Assuming a more normal weather pattern and stable cow numbers, NZ milk production in 2013 is forecast at 20.20 million metric tons (MMT), slightly lower (nearly one per cent) than last year’s estimated production level of 20.35 MMT. 2012 production was seven per cent higher than in 2011, which in turn was 10 per cent higher than in 2010.

Taking into account that cow numbers have only risen by about seven per cent over the two-year period (2011-2012), the production increases are a testament to the considerable genetic potential of the national herd that was just waiting to be expressed under the right environmental conditions.

Whole milk powder is expected to remain the product of choice for NZ dairy processors. Although milk supply is expected to decline (marginally) in 2013, WMP production is forecast at 1.25 MMT, the same as the estimated 2012 production level, which is about 10 per cent higher than in 2011. In 2012, production capacity has been expanded by the addition of a new 15 MT/hr powder drier (75-100,000 MT/year); this will be followed in 2013 by the addition of a 30 MT/hr drier (up to 200,000 MT/year).

In response to a smaller milk supply, production of cheese, butter/anhydrous milkfat, and skim milk powder are all expected to decline slightly in 2013. In 2012, cheese production is expected to be up 14.8 per cent year-on-year and is estimated at 310,000 MT; butter/AMF up 5.7 per cent at 499,000 MT; followed by SMP up 6.6 per cent at 390,000 MT. Basically all the result of the big increase in milk supply during 2012.

Over 95 per cent of New Zealand’s dairy production is exported in one form or another, thus as production increases so too do exports. Inventories are forecast to be up approximately 20 per cent at the end of 2012, moderating the between year changes in export shipments. For 2013 total PSD commodity exports are forecast at 2.53 MMT a 3.5 per cent increase on the 2012 estimated export level of 2.45 MMT, which in turn is about 6.6 per cent ahead of 2011 exports.

WMP is consistently the standout performer growing from an estimated export level of 1.218 MMT in 2012 to a forecast of 1.275 MMT in 2013. Cheese is enjoying somewhat of a reprieve at the moment and is expected to buck a trend of reduced exports since 2006 and come in with exports of around 275,000 MT for both 2013 and 2012.

On the regulatory front, Fonterra, which processes approximately 89 per cent of the milk produced in New Zealand, is expected to implement “Trading Among Farmers” (TAF) by the end of 2012. TAF, a huge constitutional shift, is designed to substantially remove redemption risk from the Cooperatives balance sheet. The proposed changes have not been without controversy.