Fonterra Cooperative Group's New Zealand milk collection was down 5.7 per cent on the year in the six months to November 30 as dairying regions were hit by unfavourable weather conditions.
The tighter supply in some regions such as New Zealand has helped shore up the global dairy prices, eroded in the past few years by global oversupply and weak demand. Dairy prices have risen more than 75 per cent since July, leading Fonterra to hike its milk price forecast last month to $6 per kilogram of milk solids for the current season, compared with $3.90/kgMS last season.
Prices eased 0.5 per cent in the overnight Global Dairy Trade auction, but the result is expected to have little impact on Fonterra's forecast. ASB Bank senior rural economist Nathan Penny today said the dip was marginal and he now tips Fonterra to pay $6.50/kgMS this season as "we expect lingering global production weakness to support dairy prices well into 2017".
In its latest global dairy update, the world's biggest dairy exporter said milk collection was down 7.8 per cent on the North Island over the six-month period and down 1.8 per cent in the South Island. Its milk collection across Australia for the five months to November 30 was 9.4 per cent lower than it was in the same period a year ago. Fonterra is forecasting that New Zealand milk collection will be down 7 per cent in the 2016/17 season.
Regarding its main markets, Fonterra pointed to a pickup in demand for China with imports up 26 per cent, or 468,000 metric tons, in the 12 months to October compared to the same period a year earlier. "Strength in China dairy imports numbers is driven by fluid and fresh dairy up 60 per cent, infant formula up 37 per cent, whey powder up 17 per cent and whole milk powder up 14 per cent," it said.
