Articles

Global Milk Supply Insights: New Zealand

The EU abolished milk quotas in April, but what is the state of play in other parts of the world? Rhian Price and Charlie Taverner of Farmers Weekly investigated effects being felt in New Zealand. Continuing articles will look at effects felt in Canada, the United States and the Netherlands.

New Zealand
• In the year ending 2014, New Zealand produced 20.7bn litres of milk
• There are 4.9m cows in milk, with an average herd size of 413
• Just under 12,000 dairy farmers in New Zealand
• Average yield is 4,196 litres a year

George Moss, Tokoroa, New Zealand. Photo courtesy of Farmers Weekly

George Moss, Tokoroa, New Zealand. Photo courtesy of Farmers Weekly

Farm facts:
– Totals 129ha across the two units
– Producing 6,500litres per cow a year
– Cost of production is around $3.80 a kg (£1.80/kg) of milk solids

In New Zealand the only thing holding back milk production is weather conditions, says George Moss, who milks 335 cows across two units in Tokoroa, in partnership with his wife Sharon.

He is a member of the Fonterra, the country’s biggest farmer co-operative, which is responsible for about 90% of NZ milk supply. Fonterra’s milk price is worked out using commodity prices on the GDT auction before deducting costs.

The farm is currently experiencing its third successive drought and as a result Mr Moss has been forced to reduce the stocking rate on one farm and convert his organic herd back to conventional.

“We reduced our stocking rate from 185 to 165 with the view to reduce the amount of feed we are purchasing and become more self sufficient.

“The other farm is no longer organic after six years. We found the dry conditions too hard to manage.” A 20c/litre (9.8p/litre) drop in milk price has been a further blow.

“Last year the milk price was really good at 70c/litre (34p/litre). This year it has fallen to 40c/litre (19.5p/litre) as a result of the extra milk globally.”

He says the only slight limitation on a NZ dairy farmer supplying Fonterra is that you must have your three-year rolling milk production average backed by shares.

“If I want to increase my production beyond my three-year rolling average production there’s a requirement for me to purchase extra shares.

“But we can purchase those about six months after the milk has been produced and they pay a dividend.”

In NZ there are no supply management controls to restrict production, nationally or at a processor level.

“Fonterra is obliged to take all the shareholder’s milk we supply; it is one of their core co-operative principles.

“If farmers [NZ] can produce extra milk and get a margin they will do it but at the moment production is being dictated by climatic conditions.”

Mr Moss believes the system in NZ works well.

“I think we have it right for NZ. The Canadians are producing milk principally for the domestic market. We are producing milk for export – about 90% of our milk is exported.

“Our strategy is to keep the cost of production low and maintain competiveness against other countries.”

He believes if restrictions were introduced it would push the cost of milk production up and reduce their competiveness globally.

“At the end of the day milk is a commodity and those that will stay in the business will be those producing the very best quality milk for the lowest cost.”

He says there is power in numbers and that is why Fonterra has such a big role to play in the NZ dairy industry.

“If we stay united that will give us more clout. It is the only way we can influence the market. Farmers that are united invariably have better economic outcomes.

“In England farmers appear to have become fragmented and their margins are being squeezed by supermarkets.

“[Fonterra brings] massive benefits to NZ farmers. It is the benchmark [for price] as it endeavours to drive the milk price up as high as possible.”

By: Rhian Price and Charlie Taverner of Farmers Weekly

 


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