NZ may produce record volumes of milk this season, Rabobank says

New Zealand milk production may grow to a record of nearly 23 billion litres this season. Photo / 123RF

New Zealand milk production may grow to a record of nearly 23 billion litres in the 2018/19 season, bolstered by a favourable milk price and adequate feed reserves, and assuming normal weather conditions, according to Rabobank's dairy analyst Emma Higgins.

In Rabobank's latest Dairy Quarterly report, Higgins forecasts the nation's year-on-year milk production will grow 2 per cent for 2018/19, the year that started on June 1.

Given Fonterra Cooperative Group's estimate that its own milk collections will increase 1.5 per cent year on year, national milk supply could increase as much as 4 per cent, Higgins noted in the report.

"If realised, this would be a record for New Zealand milk production," said Higgins, adding milk output would be 872,000 tonnes higher than the previous season.

Rabobank expects 2017/18 milk production to match that of 2016/17, resulting in 21.4 million tonnes of milk, according to Higgins.

Meanwhile, a stalling in the pace of milk supply growth across the world's seven main dairy exporting regions in recent months offers reasons for a more bullish market, according to the report.

A New Zealand milk price of $6.80 per kilogram of milk solids is now within reach for 2018/19, Higgins said.

"With milk supply growth out of Europe and the US failing to meet market expectations, global farmgate milk prices have moved off the lows posted at the start of the year and are expected to move seasonally higher through the second half of 2018," according to Higgins.

To be sure, "a mix of upside and downsized market risks warrant monitoring," Higgins noted. "In particular, the start of the upcoming New Zealand season and the level of escalation in trade wars are likely to set the stage for the fourth quarter of 2018 and the first half of 2019 dairy markets."