Thursday, March 28, 2024

Fonterra maintains conservative milk production forecast

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Fonterra has maintained its milk forecast for the current season of -3.3%. The Global Dairy Update released today revealed no change to this season’s milk production forecast after February milk volumes were released.
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February milk collections were down 6.8%, with the North Island down 5.7% and the South Island down 8.3% compared with the previous February.

The slow down in milk production during February reduced the season to date growth rate back to +1.5% for the nine months from June 2014 to February 2015. There is now only three months remaining in the current production season and it seems unlikely that milk intakes will fall so sharply that total production for the season reaches the Fonterra forecast of 1532 million kgMS. To reach this target just 241 million kgMS need to be produced before the season ends. This is 23% less than was produced during the final 3 months of the 2013-14 season and also 10 million kgMS less than Fonterra collected during the final 3 months of the 2012-13 season when NZ recorded its worst drought in more than 50 years.

Fonterra's milk forecast looks conservative, particularly given that rain has now fallen across much of NZ. While this won't immediately solve pasture deficit problems it does mean that a greater number of cows will be milked longer than would be the case if rain had not fallen on the main dairying regions.

In the past few weeks Fonterra has progressively added additional volume onto the GlobalDairyTrade (GDT) auction. The presumption that we made was that the extra volumes were due to more milk being collected than expected. However as the milk forecast has been maintained at -3.3% this means the milk intakes will now have to slow down even more in the coming months to attain this figure. Therefore the milk production forecast is not consistent with additional volume being added back onto GDT. 

Last week when Fonterra added volume back to GDT they advised that changes in volumes occur for a number of reasons:"The key factors that influence our GDT forecasts are: seasonal changes or weather events impacting our milk supply; production, storage or supply chain constraints; anticipated customer demand from GDT and non-GDT sales channels; and differences in relative returns of products".

Therefore the reduction in GDT volumes may be related to consumer demand to buy on or off GDT rather than any change in the total supply of dairy products.

 

Fonterra's February milk intakes were well within the range forecast for NZ milk collection by AgriHQ. But the AgriHQ forecast does not assume that we will see a 23% reduction in milk intakes during the final 3 months of the season.

Click here to access the AgriHQ Milk Production Predictor.

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