Higher NZ milk production, increased 2015 payout to boost NZ economy by $1.8B, AgriHQ says

The expectation for increased milk production comes as dairy companies are forecasting higher payouts to farmers this year on the expectation global prices will pick up. Photo: Ross Setford.

Increased milk production and a higher forecast payout to dairy farmers for the upcoming season should bolster the New Zealand economy by $1.8 billion, according to AgriHQ.

The AgriHQ NZ milk production predictor forecasts growth of about 2.5 per cent to 1930 million kilograms of milk solids for the 2015/16 season, following 3 percent growth in the 2014/15 season.

The expectation for increased milk production comes as New Zealand dairy companies are forecasting higher payouts to farmers this year on the expectation global prices will pick up.

Fonterra, the world's largest dairy exporter, expects to increase its payout for the 2015/16 season to $5.25 per kilogram of milk solids, from $4.40/kgMS in 2014/15.

Synlait Milk expects to pay $5.50/kgMS in the upcoming season, up from a range of $4.40-$4.60/kgMS this season.

Still, two seasons of below-average milk prices are likely to put pressure on farm bank balances.

"Dairy farmers will be looking to mitigate the impact of low farmgate milk prices by maximising production at minimal cost," said AgriHQ dairy analyst Susan Kilsby.

"Pasture production and the number of cows in milk are the main factors which determine how much milk will be produced."

Farmers are expected to focus on inputs which will put more milk in the vat, Kilsby said.

New Zealand milk output has increased an average 5.5 per cent per annum over the past five years, AgriHQ said.

Productivity gains accounted for half of the growth while increases in the stocking rate and the area of land used for dairy accounted for the rest, it said.

Gains in per-cow production were achieved through improved pasture management as well as greater use of supplementary feed, it said.