Fonterra forecasts 3 per cent rise in NZ milk collection this season

Fonterra expects to collect more milk from New Zealand farms this season. Photo / Ben Fraser

Fonterra expects to collect 3 per cent more milk from New Zealand farms this season as higher milk prices encourage farmers to lift production.

The country's dominant milk processor forecast its New Zealand milk collection for the current 2017/18 season would rise to 1,575 million kilograms of milk solids, from 1,526 million kgMS in the season ended on May 31, it said in its latest Global Dairy Update.

Fonterra expects a better season ahead for the dairy industry as the world's largest exporter of dairy products benefits from rising prices. Last month it set its initial forecast for milk payments to farmers for the 2017/18 season at $6.50/kgMS, up from its expected payout for the 2016/17 season of $6.15/kgMS.

The cooperative said today that last season's New Zealand milk collection was impacted by wet conditions through spring, however more favourable weather conditions through summer lifted production but cooler conditions in May dented collections in the South Island.

"At this stage, collections are estimated to increase by 3 per cent in 2017/18 assuming a return to more usual climatic conditions," Auckland-based Fonterra said in the update.

"The improved milk price environment should provide support to farmers' milk production plans."

The cooperative noted that it was very early in the season to accurately forecast the total milk collection, and said it would continue to provide updates as the season progresses.

In Australia, Fonterra said it collected 116 million kgMS in the 11 months to May 31, which is 1 million kgMS higher than last season.

"Last year's production was heavily impacted by lower Australian milk prices," the cooperative said. "Favourable autumn conditions combined with lower key input costs have aided the season recovery in milk collection."

The cooperative noted that of the main dairy exporting countries, New Zealand's dairy export volumes lifted 4 per cent in the 12 months to March, Australian volumes edged up 1 per cent, and US volumes advanced 8 per cent. In the European Union, export volumes for the 12 months to February lifted 4 per cent.

China, the largest importer of dairy products, lifted its total imports 10 per cent in the 12 months to April. Its fluid and fresh dairy imports increased 13 per cent, whole milk powder lifted 8 per cent and whey powder advanced 12 per cent.

In other Asian markets, dairy imports lifted 7 per cent in the 12 months to February, while Latin American imports increased 11 per cent, and imports in the Middle East and Africa slipped 3 per cent.

Units in the Fonterra Shareholders Fund last traded at $5.94 on the NZX, and have gained 15 per cent in the past year.