New Zealand Production Struggles
New Zealand’s milk production season is once again off to a slow start despite earlier optimism that output would recover. In August, the third month of the season, milk production totaled 1.329 million metric tons (MMT). This represented a decline of 4.9% year over year and the lowest August production since 2017. Even though the bulk of the production season lies ahead, cumulative output so far this year has trailed the prior season by 4.4%. The decline prompted Fonterra recently to revise its forecast for the 2022-23 season down 1% to 1.495 MMT of milk solids.
According to the New Zealand National Institute of Water and Atmospheric Research, this past winter was the warmest and wettest on record with many areas of the country experiencing flooding, which caused cow comfort to suffer along with pasture quality and availability. Persistent labor scarcity, elevated operating costs, and supply chain struggles further disrupted milk collections, exacerbated the weather challenges.
The production challenges facing Kiwi dairy producers are only expected to intensify in coming years as mounting environmental regulations discourage expansion. A recent report from Dairy New Zealand suggests that these dynamics are already shaping the industry. After peaking in the 2017-18 season at 1.755 million hectares, the amount of land dedicated to dairying has dwindled each year, falling to 1.714 million hectares in the 2020-21 season. Thus, restricted land use appears to be just one more headwind the New Zealand sector will face in coming years.
September 28, 2022