The season started tremendously with exceptional production in the early part of the season and record levels of milk flowing at the peak of the season. However by December conditions were beginning to get a little dry at the northern tip of the North Island. By late January there were signs the drought was spreading south. But the speed and the severity that the drought hit during February and March was totally unexpected. The drought has been described as the worst New Zealand has experienced in at least 50 years. The South Island was not impacted to the same degree as the North Island, partially due to a much greater proportion of the dairy farms having access to irrigation than in the North Island. In the south the dairy industry is also rapidly expanding which helped the South Island to increase its milk supply.
The drought meant cows were dried off earlier than normal and cows were culled earlier and in greater numbers than usual. In the period from October to May 190,000 more cows were culled than during the same time period the previous season. Even without the drought the cow cull was expected to be elevated this autumn. In the autumn of 2012 pasture growth was extraordinary good. We estimate this lead to 100,000 additional cows being retained than would have otherwise been the case. The general expansion of New Zealand’s dairy herd could also account for another 40,000 culls per annum. Therefore the drought may have meant that an additional 50,000 cows were culled than would have otherwise been the case. So depending on the number of two year old heifers that will commence milking this season we could begin the dairy season with cows numbers being 1% down. Productivity gains associated with the culling of low performers should more than make up for the shortage of cows.
The higher milk prices on offer for next season should provide farmers with sufficient confidence to purchase supplementary feed to fill any feed shortages that may occur in early spring. The upper half of the North Island is not expected to have fully recovered from the drought by the time the new dairy season gets underway. Stocks of traditional feed sources such as grass and maize silage will be scarce on many farms. Therefore demand is expected to be high for additional supplements such as palm kernel or locally produced grains such as wheat and barley.
Milk production growth is expected to occur in the 2013/14 season. Exactly how much growth can be achieved will ultimately be determined by the weather. Fonterra’s CEO has stated that they are expecting production growth in the vicinity of 2-3%. The Agrifax team is a little more bullish than this as our calculations indicate that growth of +5% is attainable in the season ahead.
