28 Oct, 2008 Milk production fell 3% in MY 2008 due to a drought that engulfed most of New Zealand during the summer months. Production is forecast to rebound by 8% in MY 2009, due largely to an increase of approximately 200,000 cows over the past two years.
The drought and resulting downturn in production led to a 13% drop in dairy product exports in MY 2008. However, exports are forecast to rebound in MY 2009 with cheese and nonfat dry milk expanding by 15% and whole milk powder by 13%.
Executive Summary
After steadily expanding at a rate of 4% per annum since 1990, milk production in New Zealand fell 3% in marketing year MY 2008 (June/May year). The decline is attributable to the drought that engulfed most of New Zealand during January to April 2008. Milk production is forecast to rebound in MY 2009 by 8% reaching a record 16.3 million tons. The upturn is primarily attributable to an estimated increase of 200,000 cows over the past two years. While there is potential for the continued expansion of milk production in New Zealand, there are also a number of factors tempering future production increases including the high price of land, environmental constraints, and increasing on-farm costs.
The drought and resulting downturn in production led to a 13% drop in dairy product exports (excluding liquid milk exports which actually increased by 21%). Whole milk powder exports were off 7.3% while cheese, butter and nonfat dry milk were down 8.4%, 16.5% and 23%, respectively. Dairy exports are forecast to rebound in MY 2009, with cheese and whole milk powder exports expanding by an estimated 15% and whole milk powder 13%.
Soaring food prices made front page news in New Zealand earlier this year and there is growing concern regarding the affordability of food. Food prices, which rose 8.2% in the year to June, joined forces with soaring oil prices to push inflation up to 5%. However, according to Statistics New Zealand, dairy product prices were up even more. Milk was up 22%, cheddar cheese 62%, and butter 87%.
In August 2008, New Zealand's Trade Minister Phil Goff announced that a "substantive conclusion" was reached at the negotiations between ASEAN, New Zealand and Australia for a Free Trade Agreement (AANZFTA). The accord is expected to be signed at the ASEAN leaders' summit in Bangkok in December 2008 and is expected to be "comprehensive" (i.e., dealing with all market sectors including dairy).