New Zealand Milk Output Falters
June 27, 2022
New Zealand’s dairy industry kicked off the 2021-22 season at a sprint, with recordsetting milk collections in both June and July 2021. But then the pace slowed. Output fell below year-ago levels for 10 straight months. Kiwi dairy producers wrapped
up the season in May with collections down 6.5% from the prior year. For the 2021-22 season, milk collections fell 4.2% below 2020-21 on a fluid basis and down 4.1% on a milk solids basis. That brought milk output to its lowest level since 2017-18.
New Zealand dairy exports also faltered. While January through May shipments of cheese, butter, and skim milk powder (SMP) were roughly on par with previous years, whole milk powder (WMP) exports were noticeably lower. In the first five months of the year, New Zealand’s WMP exports were just shy of 1.3 billion pounds, down 19% from the same period in 2021 and the lowest since 2018, when milk output was similarly restrained. Processors in New Zealand have reduced WMP production because SMP offers better returns. Slower demand from China has also weighed on export volumes. So far, these factors explain the setback in WMP sales, and lower exports do not necessarily signal a waning global appetite for WMP. But the market remains on edge.
Looking ahead, milk output and dairy product production could partially recover in the 2022-23 season. However, dairy producers are anxious about the ongoing labor shortage and rising cost of inputs. Some are reducing stocking rates to comply with
tightening emissions standards. But they are also looking forward to another season with record-high prices and better weather. Recent rains have helped to end the drought that plagued some key dairy areas over the past season. Last week Fonterra raised its projection for 2022-23 prices to about $9.88/ kg of milk solids (NZ), or more than $20/cwt (U.S.). The lofty price is likely sufficient to encourage dairy producers to keep pastures well stocked, but given the cost of grain, it may not be high enough to spur supplemental feeding and sharply higher milk yields.