New Zealand dairy production seen to rise

New Zealand milk production for marketing year (MY) 2008-09 is to increase 8 percent compared to the drought affected MY2007-08, reports the US Department of Agriculture.

The USDA report says pasture conditions, weather patterns and herd numbers suggest the industry is on track to produce 8 percent more milk in MY 2008-09 (June1/May 31 year) to reach a record of 16.35 million tonnes. However, the continued slide in dairy commodity prices, drop in export levels, and build up in stocks are a growing concern for the New Zealand dairy sector and the New Zealand economy. Dairy exports account for over a quarter of New Zealand's total merchandise exports and approximately 7.5 percent of GDP.

New Zealand dairy exports fell 9 percent during the first seven months of MY 2008-09 as against the same period last year. The biggest falls were in cheese, butter and butter oil, and whole milk powder; down by 21 percent, 10 percent and 4 percent, respectively. The drop in volumes has posed a challenge to Fonterra --the world's biggest dairy cooperative--to secure adequate storage space.

The country's Agricultural Affairs Office estimates the country's estimates of dairy products have approximately doubled since mid-2008 in the range of 340,000 to 370,000 tonnes. The USDA also revealed that three new milk processing companies, in the last few years, have started production in New Zealand and approximately three more are expected to come on stream within the next few years. As a result, Fonterra's share of milk collected in New Zealand has dipped from 94 percent to an estimated 91.5 percent in MY 2008/09. If all of the new processors coming on stream achieve their business projections, Fonterra's share could slip further to between 85 and 87 percent within five years.

For more of the USDA report, please click here