The Weekly Dairy Report: Milk auction delivers a blow to returns but autumn rain should boost production to help compensate

The dry areas have at last seen some days of steady rain to start the autumn pasture revival – so important for winter supplies and a successful start to next spring.

While many areas in the north have had too much rain and some pastures will be waterlogged, other areas will welcome the moisture that will revive pastures and winter feed crops.

Rotational grazing lengths are slowly being extended and N applications will be used to boost feed, especially now that it has rained.

Advisers remind managers that it takes time to recover BCS in cows especially with autumn saved pasture, ( 3 months for 1 BCS) and they need to work back from calving to determine dry off time especially for the leaner animals.

This improved soil moisture levels that has now covered nearly all the country will be a boost for milk flows and production forecasts could now be ahead of earlier estimates.

Bank analysts report there has been a big variation in production across NZ dairy regions from OAD milking and high empty rates, to record milk flows.

However the market believes there is surplus product available, and reflected that at last week’s auction, with prices dropping 6.4% for the basket of milk commodities.

Worryingly it was powders that fell the most, whole milk dropping 12.4%, and worse still, skim milk suffering a 15.5% fall, on the back of growing unsold stocks of EU product.  

This has put a dent in the confidence to all in the dairy sector, and bank analysts, lead by the normally optimistic ASB, made big adjustments backwards to this year’s milk forecast.

A week after, WMP futures have recovered somewhat and it is hoped lower prices will stimulate demand up again to sustainable levels, and return the Oceania SMP premuim over EU stocks.

Forest and Bird have pulled out of the Water Forum, but the Government still believes in irrigation for agriculture as they support South Canterbury’s Hunter Downs water scheme, which moves to the next stage of development.

A reduction in the environmental footprint of intensive farming is happening, lead by the Lincoln University Dairy Farm, which has shown good profits and production can be achieved with a lower stocking rate.

PGGW report that sales volumes of dairy stock are up on last year, with summer prices ranging between $1700-$2000/hd for cows while rising 2yr heifers have been trading from $1500-$1750.

The dairy real estate market was quiet in the south but in the North Island built to similar years levels and prices, as optimism returned with a more positive payout.