The Australian drought could push up international dairy prices with Dairy Australia warning milk flows could be 6.9 per cent lower this season than last.
Fonterra said it was looking at markets Australian companies would not be able to supply, but the dairy giant warned any lift ininternational prices would not be seen until later in the season and added that a high exchange rate would negate any gains for farmers in New Zealand.
The co-op's manager of sustainable milk growth, Mark Leslie, said the 94 new dairy farms this season had helped milk flows stay ahead of last year.
Without them the wet, cold spring would have kept production below last year. "If it hadn't been for the new milk coming on stream due to dairy conversions, which is especially relevant in the lower South Island, we probably wouldn't be tracking ahead ..," Leslie said.
Fonterra processed a record 1210 million kilograms of milk solids last season.
The southern North Island was the only area where production was lower than last year.
Fonterra will not release exact production figures, but said the threat of El Nino weather patterns over summer was a concern, as it could stem production.
Dairy Australia is predicting production of low cost products such as milk powder could be curbed as the country deals with one of the most severe droughts in living memory.
The dairy industry group said the drought would reduce milk production by 600 million litres.
