6 Oct 2011

Supply surge won't dampen world dairy prices - Fonterra

7:57 am on 6 October 2011

Fonterra doesn't expect a seasonal surge in New Zealand's milk production to dampen international dairy prices.

The co-operative says the daily milk supply flowing to its processing plants is up more than 13% on average throughout the country compared with last year, and that's put more pressure on milk collection and processing.

Fonterra trade and operations managing director Gary Romano says bringing extra processing facilities into play to handle the increased milk flow means a less valuable product mix.

But he says it will make little difference to the supply of dairy products in world terms and won't put any more pressure on dairy prices, which have been easing back in the global dairy trade auctions.

Mr Romano says growth rates around the world have a much greater impact on dairy prices than what's happening in New Zealand.

He says Fonterra isn't revising its forecast of a 2.5% increase in milk production for the season at this stage, because it's still early in the season and it's received only 20% of its expected production so far.

Excellent spring conditions for dairy farmers

Dairy farmers are making the most of the best spring conditions they've had for years in regions such as Waikato.

Waikato dairy consultant James Allen, of AgFirst, says the record milk flow for this time of year has brought its own challenges, but he says farmers are coping with those.

He says one or two farmers have overflowing vats - a good problem to have. They have either been getting their milk picked up twice a day by Fonterra, or in some cases having new vats put in.

Mr Allen says farmers are also aware of NIWA predictions of drier than normal conditions coming up in the late spring and early summer.

Farmers are planning for this by getting a good level of pasture silage made in the next two to three weeks and locking in supplements at a reasonable price now for the summer.