March 24, 2022
New Zealand milk production continues to tank despite some of the highest farm milk prices ever. Milk collections in February plunged 8.2% by 159,000 metric tons, to 1.773 million metric tons. February’s decline was the seventh straight season-over-season monthly drop. February’s milk collections represented the steepest percentage yearover-year decline since March 2019 and the largest volume drop since October 2016. Season to date, milk solids through February were down 4% compared to the same period in the previous season.
Weakening milk production in New Zealand is the culmination of several factors, including rising costs, inclement weather, and ongoing environmental concerns. Soaring costs and are expected to climb further due to Russia’s ongoing attack on Ukraine, which is expected to send rising feed and fertilizer prices skyward. Russia and Ukraine are both leading exporters of nitrogen-based fertilizers. Fonterra CEO Miles Hurrell said last week that “the conflict in Ukraine has added to an already complex Covid-19 operating environment, impacting global supply chains, the oil price, and global supply of grains.” Labor shortages have also added to costs.
A wet start to the milk production season in New Zealand has given way to an exceptionally dry summer that has negatively impacted pasture quality. New Zealand’s rainfall level plunged 72.2% below the previous year, hitting a 20-year seasonal low in January.
Climate and polluted waterways have put New Zealand dairies under more environmental scrutiny in recent years. In 2019, dairies were even included in the country’s emissions trading scheme, a move they adamantly oppose. While the scheme won’t become effective for dairies until 2025, growing environmental concerns will continue to put a cap on cow numbers.
The poor season has compelled Fonterra to pay its producers 30% more for milk than it paid last year at this time, and the price increases aren’t over yet. The question is whether more increases will be enough to encourage more milk production in the upcoming season.