Fonterra maintains milk production forecast but warns of farmer pull back

By Mark ASTLEY contact

- Last updated on GMT

Fonterra maintains milk production forecast but warns of farmer pull back

Related tags: Milk, Dairy farming

New Zealand dairy giant Fonterra has maintained its milk production forecast for the 2015/16 season, but has signaled it may decline later.

Earlier today, the cooperative announced it has maintained its milk volume forecast for the 2015/16 season, which began June 1, of 1.589bn kilograms of milk solids (kgMS).

This is between 2% and 3% lower than the amount collected by Fonterra last season. 

While Fonterra expected such a decline, there is evidence of farmers "pulling back on production,"​ said Miles Hurrell, group director of cooperative affairs, Fonterra.

Such efforts, he said, could lead to a negative revision later in the season. 

“Farmers are responding to the lower forecast Farmgate Milk Price by returning to more traditional farming practices,"​ said Hurrell.

"They are reducing the use of feed supplements, and lowering stocking rates per hectares as they concentrate on utilising pasture."

“Market data from several independent sources show that cows are being culled at higher rates than last season while many of our farmers are also providing early advice that they are expecting significant year on year volume reductions.”

“In addition, currently our daily milk collection average is lower than for the same period last year.”

Fonterra is required to update its milk volume forecast for the current season by early September under the Dairy Industry Restructuring Act (DIRA) - the legislation that allowed the merger of New Zealand Cooperative Dairy and Kiwi Cooperative Dairies to form Fonterra in 2001.

Under DIRA, Fonterra is also required to consider its FGMP forecast each quarter.

In August, to account for the imbalance in supply and demand, Fonterra slashed its FGMP forecast for the 2015/16 to NZ$3.85 per kilogram of milk solids (kgMS).

In May, Fonterra announced an opening FGMP forecast of NZ$5.25 per kgMS. 

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