«We are conscious that milk output may come back a bit as we go through summer» in the Southern Hemisphere, said Doug Steel, senior economist at Bank of New Zealand in Wellington. «An El Nino pattern usually hits agricultural production and the electricity sector via the lack of cheap hydro generation so it’s a drag on GDP.»
Milk production plunged in the 2012-2013 season during New Zealand’s worst drought in 30 years, especially the largest dairy regions on the North Island. This season those northern provinces are enjoying good grass growth so any impact from dry conditions in the south may be less damaging, Steel said.
Still, potential drought looms as farm incomes fall amid a slump in global dairy prices. Fonterra predicts its milk payment per 2.2 pounds of milk solids will fall 37 percent this season.
«Grass is the cheapest source of feed and when the grass doesn’t grow you look to alternatives but you’ll only do that if it’s economic,» Steel said. «With milk prices lower, supplements won’t be as economic.»
NIWA said Nov. 28 that drought conditions may be imminent in several regions unless sustained rainfall occurs.
Environment Canterbury this week imposed restrictions on Opuha Water Ltd., which supplies farmers who then supply Fonterra’s Clandeboye plant. Dam storage levels are just above 50 percent of full, an unprecedented amount reflecting low rainfall and a lack of snowfall in the winter, Opuha’s chief executive said in a Nov. 27 statement.
Farmers are required to reduce their take by 25 percent to extend the time that water can be provided. If current condition prevail, more severe restrictions will be needed by late January, the company said.
