By Alexandria Winning-Browne, NZX dairy analyst
DCANZ released their October milk production report week, outlining a 2.9% decline year on year. This figure wasn’t as low as we had expected, with a peak milk production figure of 252 million kg MS; however it was the lowest peak milk production figure since 2016. Season to date, milk production is 3.5% lower than the same period last season.
Weather variability has impacted pasture growth considerably, with record levels of moisture, low light, and hotter than average temperatures providing a difficult environment for grass growth. While conditions eased in the last half of October, most of the North Island is still recovering from the excess water, and this week’s flash rain won’t have helped. On the other hand, rain has vastly improved the South Island’s conditions, providing optimism for grass growth volume, while quality remains in question.
Additionally, Statistics NZ reports that costs have increased a further 15% on last year. Imports of supplement feed have thus lowered. Palm kernel expeller imports were down 5% in September YoY with season to date figures down 17%. Furthermore, uncertainty around where regulations will fall, land-use change, and a lower national herd number are also affecting this season’s production.
Unsurprisingly, lower production has driven lower exports year to date. New Zealand’s October dairy exports, which reported a 1% gain on last year, have brought YTD figures up to a decline of 6%. With exports suffering through the second and third quarter of 2022, big gains through August and September have brought YTD figures much closer to that production deficit.
While October was technically an increase, this month consisted of lower milk powder exports and a greater volume of fats exported, thus the tonnage increase can be somewhat attributed to a lower average dry weight of products exported.
Whole milk powder (WMP) exports decreased 3% YoY with export volume increases to Algeria, Saudi Arabia, the UAE, Bangladesh, Indonesia, and Singapore being offset by less WMP exports headed to China. Skim milk powder (SMP) exports on the other hand increased 10% with Algeria, Vietnam, Indonesia, and Philippines increasing purchases.
Anhydrous milkfat (AMF) and butter exports reported a 33% and 39% increase respectively YoY. Both increases were driven by China and Europe, however, North America purchased more AMF while Saudi Arabia, Indonesia, and Australia bought more butter.
Cheese and whey exports reported declines of 18% and 14% YoY respectively. Cheese declines were driven by China, Japan, and Australia but Saudi Arabia and many of the Caribbean islands increased their purchase volumes. Whey export declines were driven by the US, while China tried to offset the declines with an increase of 130% YoY.
China has continued to increase their infant formula purchases out of NZ, accounting for 56% of all infant formula sold YTD, a 5% increase on last year’s market share.
From an export value basis, all major dairy commodities except WMP and cheese increased, with butter increasing the most at 55% YoY
