Output tipped to fall as dairy herd culled

DairyNZ says farmers are focused on removing any unnecessary costs. Photo / Mark Mitchell

DairyNZ says New Zealand milk production is expected to fall by 2 or 3 per cent this season as farmers focus on improving the efficiency of their farming systems.

Analysis undertaken by DairyNZ's economics group shows farmers reduced cow numbers through culling earlier than usual in the last season.

"This looks likely to continue this season in response to low milk prices," said DairyNZ senior economist Matthew Newman.

"Fewer cows along with less supplement use will inevitably mean less milk is produced and processed, so we're at this point in the season forecasting a drop of about 2 to 3 per cent."

High production in New Zealand and other dairy-producing countries has created a supply/demand imbalance, which has severely depressed prices.

Signals from DairyNZ's 14,000 levy-paying dairy farmers were "intensely focused" on how to achieve cost-efficient production this season - removing any unnecessary costs to reduce the need to increase their debt and help minimise their losses, Newman said.

The number of cows going to meat processors is up 21 per cent, more than 185,000 on the last year ended May 31 - a high level for the industry.

"Given this increase and the impact that will have on cow numbers, we don't expect to see herd sizes increase this season across the country," Newman said.

The question still hanging over the season was what the El Nino weather pattern would bring in terms of the climatic conditions for late spring, summer and then autumn.

Cold weather in July has not helped grass growth and Newman said if dry conditions returned this summer, production could drop even further.