Fonterra shares, units fall to record lows as milk production falls

Fonterra shares and units have fallen to record lows after the dairy giant said total New Zealand milk production fell 10 per cent in April from a year ago and Australian production fell 10 per cent in March.

Fonterra Co-operative shares, which can be owned only by farmers, fell as low as $3.95, or 2.5 per cent, before recovering to $3.98. Meanwhile, units in the Fonterra Shareholders' Fund, which anyone can own, experienced a similar decline.

"Dry conditions continued across most of the North Island and parts of the South Island," Fonterra said in its latest Global Dairy Update.

Fonterra's own milk collection was down 9 per cent in April, but was up 1 per cent to 1.45 billion kilograms of milk solids for the period running from June 1, 2018 to the end of April this year.

The monthly decline included a 13 per cent drop in April to 57 million kg in the North Island. The season-to-date collection is 1 per cent ahead of last year at 862 million kg. In the South Island, the April collection was down 5 per cent to 52 million kg, but there was a 3 per cent increase to 592 million kg for the season to date.

In Australia, Fonterra collected 31 per cent less milk in April and 19 per cent less season to date.

"Fonterra's share of monthly collection continues to reduce due to adverse on-farm and weather conditions, increasing cull cow rates, retirements in key regions, cost of inputs and milk collection losses in a highly competitive market," the company says.

"Dairy Australia continue to forecast a milk production decline of between 7 per cent and 9 per cent for the season."