The Weekly Dairy Report: Good January rains but the global market needs less supply not more

Dryland pasture growth in the dry South Island regions has lifted significantly on the back of last week’s rain and the two weekly falls over the past month, and prospects for plentiful winter feed and grazing for replacements has improved.

The drought status of the at risk areas has been extended, but the improving colour of paddocks and revitalized forage crops has given farmers hope the season may not be as bad as earlier predicted.

The rest of New Zealand has also had above average rainfall for the month of January and fears of an El Nino dry have diminished for the time being.

Managers are focused on maintaining quality in pastures, identifying dry cows, ensuring body condition scores are being maintained, and monitoring all young stock to ensure they are meeting growth rate targets.

New Zealand milk production figures have shown the biggest falls have been in the North Island, with the south protecting the drop better with irrigated water.

The dairy price recovery continues to be slower than expected with last weeks auction down again, and some bank analysts trimming the forecast to just over $4/kg.

This position has been reinforced by announcements by Westland (down to $4.15-$4.35) and Open Country Cheese (down to $4.00-$4.30) and Fonterra is sure to follow as the global dairy market is weak.

The international market has been slow to adjust production in response to these unsustainable prices, and coupled with China’s economic concerns, the time is running out for an upturn this season.

While some banks are still optimistic of a $6+ payout in the 2017 year other analysts believe it will take longer for prices to lift, given cheap global grain prices and the weakness of many world economies.

The potential for sheep milk production continues to be discussed and could be an opportunity to grow a niche industry some are suggesting could be as big as our wine business.

The A2 milk issue is again in the spotlight with farmers in Australia recieving much more for their milk than their NZ counterparts, and Synlait canvassing for more supply to meet demand for this specialty product.