Fonterra Co-operative Group’s milk production has dropped heading into the seasonal peak as suppliers to New Zealand’s largest commodity exporter respond to low dairy prices by winding back their output.
Fonterra’s milk intake for September, when production typically ramps up ahead of the peak in mid-October, was 8.7 per cent below the year-earlier month, the Auckland-based co operative said in a statement.
Its intake for the season to date, from June through September, was down 5.3 per cent from a year earlier.
Farmers have cut production in response to Fonterra’s lower payout forecast for the current season.
Fonterra last month raised its forecast payout to $4.60 per kilogram of milk solids, from what would have been a decade-low $3.85/kgMS, in response to improved international demand and lower local production.
Dairy product prices climbed in last week’s GlobalDairyTrade auction for a fourth consecutive time, after nearly six months of declines.
“When Fonterra announced that the payout was going to be under $4, that caused a lot of farmers to have a really good look at their costs, they culled cattle and they reduced costs and they looked to reduce production,” said OMF financial markets director Nigel Brunel.
“They reduced production because you can’t keep producing milk at a loss. This is the very first indication that milk production is down and it’s down substantially.”
Fonterra’s North Island milk intake is 9.7 per cent below September last year and 5.7 per cent lower for the season to date, the company said.
In the South Island, the company has collected 6.7 per cent less milk in September and 4.3 per cent less for the season to date.
Unfavourable spring growing conditions in some parts of the country had also impacted New Zealand milk production, Fonterra said.
Source: NZ City
