Fonterra's reduced milk volume forecast may help lift prices 29 Jan 2015
Related articles
- NZ consumers grow more upbeat, may resume spending Business
- Minister launches SmartGate in Wellington Travel
- Prime Minister to travel to South Africa News
- New Zealand-Russia begin FTA scoping discussions News
- Knowles quits as CEO of KiwiBank Business
- NZ migration bolstered by British invasion Migration
- Sludge Report #192: The Naked Budget Columns
- Budget 2010 – Building the Recovery News
- NZ manufacturing activity reaches highest since 04 Business
- NZ dollar hits 22-month high vs euro Business
Fonterra's reduced milk volume forecast may help lift weak global prices, Westpac says
By Fiona Rotherham
Jan. 29 (BusinessDesk) - Fonterra Cooperative Group’s 3.3 percent reduction in its milk volume forecast for the 2014-2015 season may provide a lift for depressed global dairy prices, Westpac Banking Corp economists say.
Fonterra expects 1,532 million kilograms of milk solids this season, matching last season’s production of 1,584/kgMS, reflecting the impact of dry weather. It had already cut its December forecast to zero growth,
The world’s largest dairy exporter today said than in some regions pasture quality has declined markedly since mid-January and some farmers are drying cows off early. There has also been a drop in feed supplements as it doesn’t stack up economically to use them given the lower forecast payout for this season of $4.70/kgMS.
Fonterra said daily milk production was now 6.1 percent lower than at the same time last season and as a result it will reduce the amount of product offered on the GlobalDairyTrade auction platform and through its direct sales channels.
Westpac economist Michael Gordon said the 3.3 percent drop doesn’t fully convey the severity of the downturn. Production was up 3.7 percent on a year ago over the first seven months of the season to the end of December so the forecast implies production in the remaining five months through to May will be down 13.4 per cent on last year.
He said the 6.1 percent drop in daily milk production compares to the 4.3 percent fall as a result of the severe drought during the 2007/2008 season. The 2010 drought, which was short-live but intense, led to a 2 percent drop in Fonterra’s production over that season, he said.
“Judging by those two previous events, the current drought is likely to take a significant chunk out of total GDP growth over the first half of this year – mostly in terms of lower exports, but with some impact on household spending and business investment as well,” Gordon said.
Given the positive economic growth, especially in construction, Westpac doesn’t expect this to result in a technical recession of two quarters of negative growth, but GDP growth is likely to be low over the next two quarters, making a cut in the OCR more likely.
Lower milk production in New Zealand is also likely to force up global milk prices above the current low levels. The last few droughts in New Zealand saw world dairy prices soar to record highs, he said.
The supply situation is not as stretched this time around with milk production in the Northern Hemisphere having grown strongly and Russia’s ban on imports from several Western countries putting a big chunk of product back on the world market.
“That only argues against prices returning to record highs; it doesn’t negate the point that prices rise when supply falls short of expectations,” Gordon said.
The dry weather has come too late to make a significant difference to this season’s milk price but it may mean forecasts for next season will need to be revised higher, he said.
The government is keeping a close eye on the impact of the dry weather and is yet to declare a medium scale adverse event. Rain is forecast for most regions later this week.
(BusinessDesk)
News
Hilary Timmins' Award-Winning UK Documentary Series To Inspire NZ Students
29 Jun 2020 Education
Dream Catchers, produced and directed by Hilary Timmins, celebrates the success stories of more than thirty inspirational New... more
New Zealand reaffirms support for Flight MH17 judicial process
7 Mar 2020 News
Ahead of the start of the criminal trial in the Netherlands on 9 March, Foreign Minister Winston Peters has reaffirmed the need to... more
Business
NZ Government's Economic package to fight COVID-19
17 Mar 2020 Business News
The Coalition Government has launched the most significant peace-time economic plan in modern New Zealand history to cushion the... more
NZ Government announces aviation relief package
19 Mar 2020 Business News
Transport Minister Phil Twyford today outlined the first tranche of the $600 million aviation sector relief package announced earlier... more
Living
Diversity was Key at New Zealand Trade Tasting in London
6 Jun 2022 Food & Wine
New Zealand Winegrowers Annual Trade Tasting was recently held in London, on Wednesday 4 May, in Lindley Hall.
It was the first... more
Kiwi author stuns Behind the Butterfly Gate
12 Jan 2022 Arts
Hidden behind the Butterfly Gate is where the secret has been kept for 76 years...
New Zealand writer Merryn Corcoran’s... more
Property
Fairer rules for tenants and landlords
17 Nov 2019 Property
17 NOVEMBER 2019
The Government has delivered on its promise to the over one million New Zealanders who now rent to make it fairer... more
New Zealand Government will not implement a Capital Gains Tax
17 Apr 2019 Property
The Coalition Government will not proceed with the Tax Working Group’s recommendation for a capital gains tax, Jacinda Ardern... more
Migration
Boosting border security with electronic travel authority – now over 500,000 issued
19 Nov 2019 Migration
19 NOVEMBER 2019
We’ve improved border security with the NZeTA, New Zealand Electronic Travel Authority, which helps us to... more
Christchurch reinstated as refugee settlement location
18 Aug 2018 Migration
18 AUGUST 2018
HON IAIN LEES-GALLOWAY
The announcement that Christchurch can once again be a settlement location for refugees... more
Travel
Gallipoli Anzac Day services cancelled
19 Mar 2020 Travel & Tourism
The New Zealand and Australian Governments have announced this year’s joint Anzac Day services at Gallipoli will be cancelled... more
New Zealanders advised not to travel overseas
19 Mar 2020 Travel & Tourism
New Zealanders advised not to travel overseas
more
Sport
The Skipper's Diary: Sir Richard Hadlee honouring his father and NZ's Forty-Niners
27 Oct 2019 Cricket
NZNewsUK London Editor Charlotte Everett spoke to Sir Richard Hadlee about why he’s chosen to publish his father’s... more
PREVIEW: All Blacks v England semi-final
26 Oct 2019 Rugby
The two most convincing quarterfinals winners are set to square off in a semifinal showdown for the ages when the All Blacks meet old... more
Columns
Gordon Campbell on the Gareth Morgan crusade
11 Nov 2016 Opinion
Gordon Campbell on the Gareth Morgan crusade
First published on Werewolf
The ghastly likes of Marine Le Pen in France and Geert ... more
Gordon Campbell on the US election outcome
10 Nov 2016 Opinion
Column - Gordon Campbell
Gordon Campbell on the US election outcome
Well um.. on the bright side, there (probably)... more
Kiwi Success
Congratulations to Loder Cup winner
26 Sep 2018 People
25 SEPTEMBER 2018
The Loder Cup, one of New Zealand’s oldest conservation awards, has been awarded to Robert McGowan for 2018... more
Appointments to New Zealand National Commission for UNESCO
16 Aug 2018 Appointments
16 AUGUST 2018Appointments to New Zealand National Commission for UNESCO
HON JENNY SALESA
Associate Education Minister Jenny Salesa is... more
Recruitment
Historic pay equity settlement for education support workers
14 Aug 2018 Recruitment
14 AUGUST 2018Historic pay equity settlement for education support workers
RT HON JACINDA ARDERN
HON CHRIS HIPKINS
Prime Minister
The... more
Historic pay equity settlement for education support workers
22 Aug 2018 Recruitment
14 AUGUST 2018Historic pay equity settlement for education support workers
RT HON JACINDA ARDERN
HON CHRIS HIPKINS
Prime Minister
The... more