Milk supply about to hit seasonal peak: Fonterra

Fonterra said milk production growth from the major exporting countries had eased as farmers around the world responded to lower dairy prices. Photo / Christine Cornege

Fonterra's milk production is close to hitting its seasonal peak.

Robert Spurway, the co-operative's managing director of global operations, said production in the North Island will probably peak this week while in the South Island, the seasonal high point is still weeks away.

"Nationally, over the past few days milk supply has been hovering around what we expect to be our peak volume," he said. Fonterra's 500-tanker fleet makes a pick-up from a farm once every eight seconds on average during the peak.

The co-operative has forecast a production decrease of around 5 per cent for this season, reflecting a number of influences including farmers culling their herds and reduction of stock feed use, as well as expected El Nino weather conditions.

"This forecast is roughly in line with current milk volumes," Spurway said.

Additional capacity at Pahiatua in the North Island and Edendale and Clandeboye in the South Island had served to bring processing capacity closer in line with supply, he said.

Tomorrow's GlobalDairyTrade auction is shaping up to be a mixed bag. Some analysts expect to see a flattening in prices, while others expect a small gain after big increases across most product groups at the last four auctions.

"GlobalDairyTrade prices could be flattish because the premiums have definitely gone in the wholemilk powder market," said Nigel Brunel, director of financial markets at OM Financial. Futures market trading suggested skim milk prices could be in for a small gain.

Brunel said that if prices remained around current levels, Fonterra's forecast farmgate milk price could pass the $5 mark from the current forecast of $4.85 a kg.

A week ago, futures were suggesting another 10 per cent increase in prices at this week's auction.

"However, some nervousness appears to have crept in over the last week that the market may be getting ahead of itself," ANZ said.

Fonterra, in a global market update last week, said milk production growth from the major exporting countries had eased as farmers around the world responded to lower dairy prices.

Dairy exports remained strong for Australia and Europe, but US exports were down largely due to increased domestic demand, it said.