Fonterra expects less milk collection amid drought

Fonterra will collect less milk than it expected from its New Zealand suppliers this season as a drought affects pasture growth in North Island regions.

Collection will be nowhere near budgeted growth of 2%-3% for the season ending May 31, Tim Deane, general manager milk supply at the Auckland-based company, said. It is too early to say what growth will be achieved, he said.

Agriculture Minister David Carter on April 8 declared the North Island province of Waikato, the nation's biggest producing region, as a medium-level drought zone, joining Northland, which has been in drought since January. Fonterra collected 16 billion litres of milk last year, with almost 50% of it from farmers in the upper half of the North Island, Deane said.

''We're rapidly losing milk volume north of Taupo now,'' said Deane, referring to a central North Island lake. ''We don't know where it will end up. We will certainly not end up achieving the forecast we set at the start of the season.''

Milk-powder prices jumped to a 21-month high this month as demand improved and food makers sought supplies after drought in northern New Zealand slowed end-of-season production, Fonterra said on April 7.

Faced with declining feed, farmers are drying off their cows earlier than usual, an industry term for halting milking. About a fifth of the company's suppliers have stopped entirely, Deane said.

In the nation's South Island, milk production is at least 8% ahead of last year, and that makes an accurate forecast for the national collection difficult.

''We still have some growth,'' Deane said. ''It depends how well the South Island conditions hold up and whether there is significant rain in the next week north of Taupo.''