Lower dairy price fails to dampen demand for palm kernel feed

Farmers have used increasing volumes of palm kernel - a cheap and effective food source that cows enjoy eating - over the past decade. Photo / Alan Gibson

Low dairy prices have not dampened demand for palm kernel - a supplementary feed which has the effect of "turbo-charging" milk production.

Data from Statistics NZ released yesterday showed palm kernel imports came to 232,971 tonnes in May, up from 141,421 tonnes in April and up from 136,452 tonnes in May last year.

Farmers have used increasing volumes of palm kernel - a cheap and effective food source that cows enjoy eating - over the past decade.

AgriHQ dairy analyst Susan Kilsby said higher palm kernel imports would not automatically flow straight on to farms as some would be warehoused for the spring, when demand picks up.

According to Dairy NZ, 5 to 10 per cent of herds are purely grass fed and with no cows grazed off the milking area. For about 40 to 45 per cent of the national herd, supplementary feed makes up about 10 to 20 per cent of its food intake.

Low farm gate milk prices - $5.25 a kg of milksolids this year from Fonterra - were expected to slow down the appetite for supplementary feed as farmers sought to cut costs.

The Ministry for Primary Industries (MPI), in its latest situation outlook report, said it expected supply and demand to rebalance over the year to June 2016 and for prices to gradually recover after falling sharply last year. MPI said it expected farmers to cut back on supplementary feed.

"I'm not so convinced that that's going to happen, because farming systems have changed," Kilsby said.

"Palm kernel is a cheap source of feed. Some will make money, no matter what the payout is, by using palm kernel, so it really depends on the farming system."