Draught Draws Cracks on NZ Dairy Production

NEW ZEALAND - Terrible drought conditions in New Zealand have hit dairy producers hard. Recent figures predict that from the period of June 1 to May 31, production will have dropped by 4.5% from the same period as the year previous.

13 March 2008

3 minute read

Oceania

The South Auckland and Waikato regions on the North Island are hardest hit by the drought. The Waikato region alone accounts for an estimated 40% of total New Zealand dairy production. Until late December, both regions were ahead of last year’s production but, by early February 2008, daily milk production was down 15% compared to the previous year.

According to figures from The Unites States Department of Agriculture, as of March 2008, daily milk production in the Waikato region was down 20% compared to the previous year. Most of the herds in the Waikato region are managed by relatively small family operated businesses consisting of 200 to 400 cows. The cows are fed predominantly on pasture with only 10% to 15% of their diets consisting of supplementary feed.

Many farmers in the region have cut back to milking once a day or have dried off their cows two to three months early, which implies overall reductions in milk flows during the second half of the marketing year in the Waikato will be approximately 30%. While some rain (approximately 25 millimeters) has fallen over the Waikato region in the last week, it is not enough to alleviate the soil moisture deficit.

The dry conditions in the Waikato set in during December 2007 and, while herds milked well, farmers were unable to set aside adequate supplements in the form of hay or silage. During January, pasture growth rates rapidly declined due to lack of moisture and pastures were grazed down to low levels. Supplemental feed is now becoming scarce and more expensive to procure.

While both the Ministry of Agriculture and Forestry and Fonterra Cooperative Ltd. are forecasting national milk flows to drop approximately 3%, several other industry analysts are predicting larger declines. Analysts at Dairy New Zealand, an industry association that coordinates research, development and extension, predict a drop of between 4 and 6%. Others forecast the decline in milk production to be even more extreme with estimates as high as 10%.

A 4.5% decline in national production equates to a drop of 705,000 tons of milk or approximately 61,000 tons of milk solids. According to industry analysts, the milk products most likely affected by the decline in production will be skim milk powder and butter. This is largely because international prices for whole milk products, such as cheese and casein, are holding up better than prices for other products. In addition, in Fonterra’s case, it tends to be more efficient and less costly to produce whole milk powder. Post estimates that New Zealand’s exports of skim milk powder and butter will each fall by 30,000 tons.

Overview of Drought Stricken Areas

Soil Moisture Deficit (mm) on 31 January 2008

The approximate position of the South Auckland and Waikato regions is indicated above. While the east coast of the South Island consistently shows a moisture deficit, dairy farms in that region are nearly all irrigated.