October 11, 2010

NZ storms may affect global milk output

Storms in New Zealand have raised doubts over the growth in milk supplies which analysts had expected to keep prices in check.

Growth in milk production in New Zealand, the world's top exporter, has gone into reverse following "severe weather" last month which brought hurricane-force winds to some areas, Rabobank said.

"Significant snow to sea level in parts of Southland and flooding in North island regions is taking its toll," the bank said.

Some producers have reduced milking to retain cow condition prior to mating. Early season milk flows have started to track below last year, it added.

Milk output, which over the June-to-August quarter expanded by 5% on-year, showed zero growth in the June-to-September period, figures which imply a steep drop last month.

"Adverse weather events in New Zealand are casting more than a shadow across the rate of growth in global production volumes expected through 2011," it said.

Last month, Rabobank forecast New Zealand production rising by 5-8% in 2010-11.

Furthermore, the storms came at time of "demand side improvement", when buyers who held off over the northern hemisphere summer had remained in the market, it added.

However, the bank stopped short of making a forecast for any implications of the market conditions for prices, apart from pointing out that relatively stability has emerged after the highly volatile dairy pricing of July and August.