ASB senior rural economist Nathan Penny said some of the reason for the healthy production numbers was that last season’s growing conditions were so poor.
«At different times last season, weather was either too wet or too dry. In contrast, this season so far, the weather and thus growing conditions have been favourable, helping production start strongly.»
As farm cashflows were positive, farmers were spending more on fertiliser applications and animal health, which was helping to boost production a cow.
ASB had doubled its 2018-19 season milk production growth forecast from 2 to 4 per cent. Fonterra forecast an increase in its milk collection volumes of 1.3 per cent to 1550 million kilograms of milksolids.
Penny said that as extra milk also meant a lower milk price, ASB had trimmed its milk price forecast by 25 cents to $6.25 a kg/MS, at the bottom of Fonterra’s $6.25 to $6.50/kg forecast payout range.
The strong start to the season, combined with a decline in global prices for dairy commodities, especially butter, had led Westland Milk Products to lower its predicted payout range for the 2018-19 season to between $6.10 and $6.50 a kg/MS, from $6.50 to $6.90 previously.
Chairman Pete Morrison said indications were that the co-operative would come in about the middle of that range.
«We have had a very good start to the season. The build up to peak milk period is higher than predicted and lasting for longer. While this might appear to be a positive for the co-operative, the reality is that during peak our processing capacity means we have to produce mostly low value bulk commodity powders in order to ensure we can get the milk through.
«That means we have to make less high value product, such as infant and toddler nutrition, which give us the best returns,» Morrison said.
Rabobank dairy analyst Emma Higgins was sticking to a forecast of $6.65 a kg/MS, at a 2 per cent increase in milk production.
New Zealand’s milk flows were at odds with global production which was slowing down following drought in Australia, Europe and parts of the United States. In South America, inflationary pressure in Brazil and Argentina was impacting on the cost of production.
«The market is working through the short-term pressure of extremely high volumes from New Zealand. This is putting a lid on Oceania commodity prices,» Higgins said.
«Buyers see no urgency to jump into the market, given how buoyant New Zealand milk production is.
«As milk supply tightens globally we anticipate commodity prices lifting, particularly into 2019,» Higgins said.
The Global Dairy Trade auction had been on a downward trend, with its last price lift of 1.9 per cent on May 15. Since then prices have dropped or remained unchanged at 10 consecutive auctions, at a cumulative loss of 17 per cent.
Production was expected to slow down in the second half of this season, compared with previous favourable autumns. Since September 1, Fonterra suppliers have been penalised for feeding their cows excessive quantities of palm kernel expeller (PKE) and the impact of this would be clearer as the season progressed, Higgins said.
Federated Farmers dairy spokesman Chris Lewis said that while weather conditions had been good for putting milk in the vat this spring, there was another seven months in the production season to go.
«It always averages out. That’s what experience tells you.»
Not a lot of silage had been made. «So if it gets drier there is not a lot of feed reserves out there.»
Prices for PKE, fertiliser and stock feed had increased significantly in the last six months which was likely to impact on sales, Lewis said.
