Meat & Livestock News

New Zealand’s Milk Production Faces Challenges Amid Global Market Fluctuations

cow udder closeup with milking machine, cow farm

New Zealand’s dairy sector is grappling with a less-than-average peak in milk production for the current 2023/24 season. Data for the initial three months reveals a nearly 2% decline in tonnage, primarily due to reduced collections in the North Island.

This comes at a time when China’s dairy demand recovery has yet to counterbalance strong domestic milk production. RaboResearch predicts that although milk supply growth will decelerate in the coming months, a full market equilibrium remains distant.

Economic Indicators and Market Trends

Bull prices in the North Island have been consistent with historical averages for September 2023, showing a minor increase by month’s end. Prices escalated from NZ$5.80/kg cwt in late August to NZ$6.00/kg cwt by late September, aligning with typical seasonal price shifts.

However, bull production has decreased by 5% for the season to date, as of early September 2023. Conversely, cow slaughter has risen by 4%, with a significant 10% uptick in the South Island.

Lamb Market and Export Dynamics

The lamb market is experiencing stagnation due to a high supply of Australian lambs and subdued demand.

South Island lamb prices remained stable through September at NZ$6.90/kg cwt, while North Island prices saw a minor increase, moving from NZ$6.95/kg cwt to NZ$7.00/kg cwt. China continues to be New Zealand’s primary export market, accounting for 50% of total exports in August, albeit a 3% decline compared to last year.

However, the value of these shipments to China has fallen by 25% year-on-year, underscoring the influence of this pivotal market.

Global Factors and Farm Inputs

The fertiliser market experienced a price correction in August, influenced by global supply and demand dynamics. Prices for various fertilisers and agrochemicals have shown mixed trends, with some dropping by as much as 30% year-on-year.

These changes are already evident at the farmgate level, particularly for high-demand products like glyphosate. The downside for farmers stems from rising petroleum prices and a weaker Australian dollar.

Economic Outlook and Interest Rates

The New Zealand dollar remained stable in September, hovering just above USc 59.5. The currency experienced a monthly trading range of USc 1.5, hitting a low of NZ$/US$ 0.5850 early in the month before rallying.

The release of Q2 national accounts on 21 September brought some optimism, as quarterly growth surpassed expectations at 0.9%, compared to a forecast of 0.4%.

However, this robust growth, coupled with a weak currency and escalating global energy prices, has led to market expectations of further increases in the Official Cash Rate (OCR), although the Reserve Bank of New Zealand opted to maintain the status quo in October.

In summary, New Zealand’s agricultural sector faces a complex landscape marked by domestic challenges and global market uncertainties. Close monitoring of these variables is essential for understanding future trends and making informed decisions.