The report noted that two consecutive years of low milk prices has taken its toll on NZ dairy farmers, with a reduction in forecast milk production and cow numbers for the 2015 and 2016 calendar years.
While the first half of 2015 saw milk production 1.1% above the same period in 2014, a cooler June to mid-September period diminished pasture growth potential, limiting production capacity. Farmers are also responding to lower farmgate milk prices by reducing the use of supplementary feed and lowering stocking rates to achieve this. USDA estimates that cow numbers are down 75,000 in October 2015 compared to the same period a year earlier.
The USDA predicts milk production for the second half of 2015 will be down 5% on the same period a year earlier, bringing the full year forecast for CY 2015 to 21.39 million tonnes of milk, down 2.3% on the previous year. Forecasts for CY2016 milk production continue the downward trend to 20.75m tonnes down 3% from the 2015 estimate.
As a factor of lower milk supply, manufacturing production is also forecast by USDA to drop. Dairy commodity and consumer goods production is forecast to fall to 2.93m tonnes in CY2015, down 4% on CY2014. The downward trend is forecast to continue through CY2016 with a further reduction of 3% to 2.86m tonnes.
The impact on exports will be less, the USDA said, due to reductions in ending stock volumes. In CY2015 export volumes will fall 0.5% to 3.03m tonnes and in CY2016 are forecast to fall a further 0.7% to 3.01m tonnes.
The lower milk supply coupled with increased processing capacity of NZ dairy manufacturers allows for an increased volume of milk at the margin to be switched from one product to another, the USDA said.
While there is evidence of increased exports for cheese, liquid UHT milk, casein, whey products and milk protein concentrates, the USDA said the effect will be more evident in the peak milk flow for 2015 and 2016 between October-December.
Production of NZ's largest export commodity whole milk powder is forecast to be down 6% for CY2015 on the previous year to 1.38m tonnes. The USDA expects this will translate into lower export volumes for the key commodity, down 4.4% to 1.36m tonnes for CY2015. Volumes of WMP produced and exported in the 2016 calendar year is expected to be similar to that of 2015.
