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Archive for New Zealand Dairy Industry

The Genomic Kick in the Pants: Why NZ Dairy is Facing a Sink-or-Swim Moment

Sunday, September 7th, 2025

NZ’s at 50% genomic bull usage while global leaders race ahead. Your farm can’t afford to wait much longer.

EXECUTIVE SUMMARY: Look, here’s what’s really happening out there. New Zealand’s genetic evaluation system got officially slammed as “not fit for purpose” by the 2024 DairyNZ report — and that should wake everyone up. We’re sitting at 50% genomic bull usage while our competitors are way ahead, and frankly, that gap’s costing us. Lincoln University crunched numbers on 127 Canterbury farms and found something interesting: spend $8,000 on a 300-cow operation, you could see $14,000 to $19,000 back annually. The tech behind this — LIC’s Single Step Animal Model — bumps up accuracy by 8%, which is massive when 60% of our cows are crossbreds. With global markets hungry for resilient genetics that can handle tough conditions, this isn’t just about keeping up anymore. It’s about getting ahead while there’s still time.

KEY TAKEAWAYS:

  • Milk production jumps 8-15% with genomic selection — start by getting your replacement heifers genotyped early and watch the data guide your breeding decisions
  • Fertility rates improve 10-20% when you use genomic data — integrate LIC’s Single Step Model results into your mating plans this season for measurable gains
  • Somatic cell counts drop up to 40% with smart genetics — less mastitis means lower vet bills and higher milk quality bonuses hitting your bottom line
  • Global crossbred demand is exploding in 2025 — source bulls with proven multi-breed genomic evaluations now, especially for tropical export markets
  • Feed costs eating your margins? Genomic efficiency pays back fast — better converting cows stretch every feed dollar further in today’s tough input cost environment
dairy genomics, New Zealand dairy industry, dairy farm profitability, genetic progress in cattle, crossbred dairy genetics

The bottom line? Your neighbors are already doing this. Don’t be the last one to figure out that your phone really can pick better cows than your gut.

Pull up a chair, mate. The other day, I was chatting with an old-school Canterbury dairy farmer. This bloke’s been walking the paddocks long enough to spot a good cow with his own eyes. “I don’t need some fancy computer to tell me who to breed,” he said.

But these days? He’s swiping genomic breeding values on his phone right between milking sessions. What flipped the script? His neighbour’s genomics-selected heifers jumped ahead by a whopping 150 kilos of milk solids. That kind of leap wakes you up.

This ain’t just chatter over the fence – the 2024 DairyNZ Industry Working Group officially called our genetic evaluation system “not fit for purpose.” We’re standing still while others chase the future.

Late 2024 LIC data drops another bomb: only about half the AI straws in NZ are from genomic bulls. That’s lagging far behind other top dairy nations.

And the kicker? We’re genotyping around 40,000 cows. To compete at the highest level, we need over 400,000 in the game. It’s like trying to fill a paddock with a bucket when you need a tank.

The Economics: What’s Actually in Your Pocket?

Lincoln University’s 2024 study on 127 Canterbury farms shows the potential, though results vary by operation.

Herd SizeAnnual Investment (Approx.)Potential Annual Return
300 Cows$8,000$14,000 – $19,000
600 Cows$15,000$28,000 – $38,000
1,000+ Cows$25,000$47,000 – $63,000

Data based on 2024 Lincoln University analysis of 127 farms. Individual results will vary.

Farmers involved in DairyNZ studies say the predictions generally match what the vat delivers. That’s coming from people who’ve heard plenty of promises before.

Tech Talk: SSAM — the Game-Changer

LIC’s Single Step Animal Model, SSAM, if you want to sound tech-savvy, is a leap forward.

Instead of separating pedigree, phenotype, and genome analysis, it handles it all at once — bumping up accuracy by around 8%. That’s massive, especially with NZ’s 60% crossbred herd.

Professor Ben Hayes from Queensland said it best: “If you nail multi-breed genomic evaluation, the future’s yours.”

The Pasture Problem: Why NZ’s Farm Setup is Different

Unlike our overseas mates with year-round calving herds, we pack all our calves into a tight spring window.

Mud, rain, and paddocks make sampling a logistical headache. Canterbury trials found pushing compliance from 60% to nearly 90% is doable — if you nail timing, weather, and team coordination. Mess that up, and you’re off the pace.

Ask any farmer who’s dealt with a wet spring and late contractors how that goes.

Aussies Nailed It First

Australia hit their stride when genomic reliability topped 70%. Farmers got on board fast because they trusted the data.

Their focused Holstein and Jersey reference herds nailed precision. No theoretical stuff — just results they could see in the milk vat.

From Rivals to Teammates: The Data-Sharing Revolution

Old rivalries? History. LIC, CRV, DairyNZ, and others are sharing data to get ahead.

Wayne McNee from LIC sums it up: “Genomic success requires population scale that exceeds any single company’s capacity. We’re either working together or we’re all falling behind.”

That’s a complete shift from the days when breeding companies treated genetic data like classified intel.

Who Crunches These Numbers?

Here’s the quiet powerhouse — NeSI and Genomics Aotearoa. Without their computing grunt, processing millions of genetic markers across hundreds of thousands of animals with complex family relationships just wouldn’t be possible.

The Global Angle: Crossbreds Rule

Most of the world’s dairy cows aren’t purebreds — they’re crossbreds. Pure Holsteins and Jerseys really only dominate in North America and northern Europe.

That means NZ’s expertise gives us an edge in tropical and emerging markets where crossbreeding is standard practice. They’re hungry for genetics that can handle environmental stress, disease pressure, and variable feed quality.

Africa’s even rolling out genomic tools made just for crossbreds. The demand is real and it’s growing.

The Skeptics’ Corner

Got doubts? Consider these results from NZ trials:

  • Better Milk Production: 8-15%
  • Improved Fertility Rates: 10-20%
  • Lower Somatic Cell Counts: 25-40%

This isn’t marketing fluff — it’s real results from real farms showing up in milk vats and vet records right across both islands. However, remember that performance improvements vary significantly by operation and management system.

The $86 Million Question

NZ’s planning to invest $58 to $86 million over five years — serious money for building reference populations, computing infrastructure, and farmer education programs.

Countries that master crossbred genomic evaluation in the next five years will dominate global dairy genetics for the next fifty. Our 60% crossbred population — once seen as complicating genomic evaluation — is actually our competitive ace in the hole.

Time’s tight and the stakes are high.

Bottom Line

  • For Farmers: Ring your breeding company about genomic testing today. Sitting still means watching your competitors bank the gains while you explain to your banker why your neighbors are consistently outproducing you.
  • For Industry Leaders: Collaborate, share data, and grow reference populations. Success demands scale; no single company can achieve it alone.

The genomic revolution rewards early adopters and punishes those who hesitate. Simple as that.

Miss this and you’ll be on the wrong side of history.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

  • Genomic Testing: Are You Just Collecting Data or Actually Using It? – This piece provides practical strategies for turning raw genomic data into profitable on-farm decisions. It bridges the gap between testing and implementation, revealing how to leverage your results for better mating choices, culling strategies, and overall herd improvement.
  • The Great Debate: ProCROSS vs CROSSBREEDING vs PUREBRED – This article breaks down the economics and long-term implications of different breeding strategies. It provides a strategic framework for evaluating which system best aligns with your operation’s goals for profitability, health, and resilience in a competitive market.
  • Stop The Guessing Game: Using Genomics to Select for Health & Wellness – Explore the future of dairy breeding with this look at health-focused genomics. It reveals methods for selecting animals with genetic resistance to common diseases, helping you proactively manage herd health, reduce treatment costs, and improve animal welfare.

Join the Revolution!

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The Kiwi Paradox: How New Zealand Just Exposed the Fatal Flaw in Global Dairy Strategy

Thursday, May 22nd, 2025

New Zealand just proved everything the dairy industry believes about profitability is wrong. Less milk, higher profits—here’s how they did it.

EXECUTIVE SUMMARY: New Zealand’s 2024-25 dairy season exposed a fundamental flaw in global dairy economics: while most regions chase volume metrics, Kiwi farmers achieved higher profits by focusing on milk component optimization over fluid volume. Despite facing their worst drought in 50 years and experiencing a 0.5% decline in fluid milk collections, New Zealand still managed to increase milk solids production by 0.1% and deliver record payouts exceeding $10.00 per kilogram of milk solids. This success stems from a payment system that prioritizes quality components over quantity, contrasting sharply with volume-obsessed cooperatives elsewhere that prioritize processing efficiency over farmer profitability. The strategic response to drought—early cow drying and quality preservation rather than volume maximization—positioned farms for stronger long-term performance. Export data further validates this approach, with New Zealand achieving 23-26% unit price increases across major dairy categories, proving that component-focused production commands premium pricing in global markets. The article challenges dairy farmers worldwide to question whether their cooperatives’ payment systems serve farmer profitability or processing plant efficiency.

KEY TAKEAWAYS:

  • Component optimization beats volume chasing: New Zealand achieved 0.1% growth in milk solids despite 0.5% decline in fluid milk, proving quality focus drives higher profitability than volume metrics
  • Payment systems determine farmer success: Cooperative structures that reward components over volume enable farmers to capture $10+ payouts while volume-focused systems limit profitability potential
  • Strategic drought response revealed superior thinking: Early cow drying and quality preservation during crisis positioned farms for long-term success rather than short-term volume maximization
  • Export premiums validate quality strategy: New Zealand commanded 23-26% unit price increases across dairy categories, demonstrating that component-focused production captures premium global pricing
  • Industry conventional wisdom needs challenging: Most dairy cooperatives prioritize processing efficiency over farmer profitability, requiring farmers to demand justification for volume-based payment structures
dairy component optimization, New Zealand dairy industry, milk solids production, dairy farmer profitability, dairy cooperative payment systems

New Zealand’s dairy sector just shattered every sacred cow of modern dairy economics. While North Island farmers faced their worst drought in 50 years, the industry still managed to grow milk solids and deliver record payouts. The uncomfortable truth? Most of the global dairy industry has been chasing the wrong metrics for decades.

Here’s a question that should make every dairy cooperative board member lose sleep: What if everything you’ve been told about maximizing dairy profitability is wrong?

New Zealand’s 2024-25 season just provided the answer, and it’s not what the volume-obsessed dairy establishment wants to hear.

The Volume Lie That’s Bankrupting Farmers

Let’s start with an uncomfortable fact that exposes the fundamental flaw in how most of the world approaches dairy economics. In April 2025, New Zealand’s fluid milk collections dropped 0.5% year-over-year to 1.46 million metric tons. Traditional dairy wisdom says this should have been a disaster.

Instead, milk solids production increased by 0.1%.

Think about this: Fewer cows, less milk, higher profits. While dairy farmers across North America and Europe continue playing the volume game like they’re competing in some bizarre milk production Olympics, New Zealand producers have been quietly mastering the art of component optimization.

Here’s the brutal reality most cooperatives don’t want you to know: Your payment system is probably designed to maximize processing plant efficiency, not farmer profitability.

Most North American cooperatives still pay primarily on volume, treating component premiums as afterthoughts. It’s like paying a wheat farmer based solely on bushels while ignoring protein content. Yet New Zealand’s component-focused system treats quality as the primary value driver—because that’s what actually determines the value of finished dairy products.

Your co-op leadership might argue that maximizing fluid volume is essential for plant throughput and “efficiencies of scale.” Fair enough, those plants need to run. But the critical question they often sidestep is: whose efficiencies and whose bottom line are truly being prioritized when farmer profitability per unit of solids stagnates while processing costs get optimized?

Ask yourself this: When did your cooperative last explain why they prioritized volume over components? Can they justify it with actual economic data, or are they just protecting their processing costs?

The Strategic Sacrifice That Revealed Everything

Here’s where the story gets really interesting—and uncomfortable for traditional dairy thinking. When drought hit New Zealand’s North Island regions, with official declarations affecting Northland, Waikato, and Taranaki, some farmers described conditions as the worst in 50 years. Dried-up groundwater sources forced early cow drying and once-a-day milking.

What conventional wisdom calls “giving up,” progressive New Zealand farmers recognized as strategic optimization.

These producers made hard decisions that would horrify volume-obsessed managers:

  • Preserved cow body condition instead of milking them into poor condition
  • Allowed strategic pasture recovery rather than overgrazing drought-stressed paddocks
  • Maintained milk quality instead of diluting their tank with poor-quality milk from stressed cows
  • Positioned for stronger 2025-26 performance by protecting their most valuable asset

The result? While fluid volumes declined, a strategic focus on quality over quantity meant milk solids production held steady. Then came the relief: NIWA’s April 2025 climate summary confirmed that northern regions received above-normal rainfall. Northland got an average of 400% of expected monthly rainfall, effectively ending drought conditions.

Question for your operation: Are you making management decisions based on next month’s milk check or next year’s profitability? Because there’s a difference, and most farmers are choosing wrong.

The $10+ Payout That Exposes Industry Lies

Let’s talk money—because that’s what pays the bills and services the debt. New Zealand’s 2024-25 season delivered farmgate milk prices that make farmers in other regions look like they’re working for charity:

  • Fonterra’s own forecast (updated March 20, 2025): $9.70-$10.30 per kilogram of milk solids
  • Dairy Market News estimate: $10.19/kgMS
  • Spot milk prices: $11.86/kgMS in late May
  • DairyNZ’s official breakeven estimate: $7.51/kgMS

When your breakeven sits around $7.51, and you’re receiving over $10.00, you’re operating with profit margins that most dairy farmers can only dream about.

But here’s the uncomfortable question that should keep every dairy cooperative CEO awake at night: How much of this success comes from New Zealand’s component-focused payment system versus the volume-obsessed models strangling profitability elsewhere?

The harsh truth? Most payment systems are designed to benefit processors, not farmers. When your cooperative pays primarily on volume with token component premiums, they ask you to subsidize their operational efficiency while leaving money on the table.

Export Data That Destroys Commodity Thinking

The April 2025 export numbers from Stats NZ (New Zealand’s official data agency) tell a story that should force every dairy leader to question their strategy:

Product CategoryVolume ChangeValue ChangeUnit Price Increase
Milk Powder+7.2%+32%+23%
Milk Fats/Butter+14.0%+43%+26%
Cheese+34.0%+52%+14%

Notice the pattern? In every single category, value growth destroyed volume growth. This isn’t market luck—it’s strategic positioning paying massive dividends.

While other regions compete, such as commodity grain farmers selling into spot markets, New Zealand consistently commands premium prices, like farmers selling specialty crops to high-end restaurants.

Here’s the question your cooperative doesn’t want to answer: If New Zealand can achieve 23-26% unit price increases while growing volume, why is your cooperative still discussing competing on cost?

The Technology Revolution Everyone’s Missing

While the global dairy industry obsesses over robotic milking systems and automated feeding, New Zealand farmers are revolutionizing dairy through something far more powerful: strategic thinking.

Sure, robots can reduce labor by 75%. But New Zealand’s approach suggests the bigger opportunity lies in optimizing what happens before the cow ever sees technology:

  • Genetic selection for component production rather than just volume—breeding for higher butterfat and protein percentages that drive actual revenue
  • Pasture management for optimal nutrition timing—like timing breeding to match peak grass quality rather than convenience
  • Strategic drying decisions based on long-term profitability rather than short-term cash flow
  • Feed supplementation focused on component enhancement rather than volume maximization

This represents fundamentally different thinking: Technology serves strategic optimization rather than technology for technology’s sake.

Critical question: Are you buying technology to do the same inefficient things faster or to do fundamentally smarter things? Because most dairy operations are choosing the first option and wondering why their margins aren’t improving.

The Sustainability Scam vs. Real Environmental Strategy

Here’s where most sustainability initiatives reveal themselves as expensive virtue signaling rather than strategic positioning. New Zealand’s approach naturally aligns environmental performance with economic optimization:

  • Higher components per unit of milk = lower environmental impact per dollar of revenue
  • Pasture-based systems = lower carbon intensity than confinement operations
  • Quality-focused breeding = more efficient resource utilization
  • Strategic seasonal management = better animal welfare outcomes

New Zealand’s predominantly pasture-based system results in lower emissions intensity per unit of milk than global averages. But more importantly, their component-focused approach means they’re producing more marketable value per unit of environmental impact.

The uncomfortable truth most environmental consultants won’t tell you: The most effective ecological strategies are those that improve profitability, not those that check regulatory boxes.

Ask yourself: Are your sustainability initiatives making your operation more profitable or just expensive compliance theater designed to make activists feel better?

The Input Cost Reality That Changes Everything

Let’s address the elephant in every farm office: input costs are crushing margins everywhere except New Zealand. But here’s why component-focused systems respond differently to cost pressure:

When your payment rewards quality over quantity, input management becomes strategic rather than reactive:

  • Feed supplementation targeting components provides better ROI than volume feeding—optimizing for butterfat and protein rather than just gallons
  • Genetic selection for efficiency pays dividends across multiple cost categories—cows that convert feed to components more efficiently
  • Strategic seasonal management reduces peak input requirements—working with natural cycles rather than fighting them
  • Quality premiums provide margin buffers against cost volatility

DairyNZ’s own numbers tell the story: breakeven around $7.51/kgMS with payouts over $10.00/kgMS represents the kind of margin management that provides genuine operational flexibility.

Question for your operation: When feed prices spike, do you panic and cut costs reactively, or do you have systems that maintain profitability through strategic adjustment?

Global Market Volatility: Why Most Strategies Fail

Recent Global Dairy Trade auction results from Fonterra’s official auction platform show volatility that’s becoming standard: Event 380 on May 20, 2025, saw prices declining 0.9%, with whole milk powder down 1.0% and cheddar dropping 9.2%. Yet New Zealand farmgate projections remain strong.

Why? Because their system builds volatility resilience:

  1. Quality premiums create price stability—like breeding for A2 genetics regardless of commodity prices
  2. Market diversification reduces single-market risk—multiple buyers competing for your product
  3. Product mix flexibility—ability to shift between products based on margins
  4. Strategic contracting—long-term relationships instead of spot market exposure

The key insight most farmers miss: Volatility tolerance increases when your production system can adapt strategically rather than just react to price signals.

Uncomfortable question: Is your operation designed to surf market volatility, or are you just hoping it goes away?

The Labor Challenge That Reveals Strategic Thinking

Here’s how New Zealand approaches labor differently: Instead of using automation to eliminate jobs, they use it to eliminate the worst parts of jobs—early morning milking, repetitive tasks, physical strain.

The result? Higher-quality workers who focus on animal care, breeding decisions, and business management rather than just keeping the system running.

Most operations get this backward: They automate to cut costs rather than improve job quality. Then they wonder why they can’t attract good people who understand the difference between running the herd harder to stand still on income versus optimizing components for sustainable profitability.

Critical question: Are you designing jobs that attract the kind of employees who can help your operation excel, or are you just trying to minimize labor costs?

The China Reality Check: Strategic Dependence or Market Opportunity?

New Zealand’s export success includes some sobering realities about market concentration. Stats NZ data shows China led export growth with an increase of $165 million in April 2025 compared to the previous year, with New Zealand reportedly accounting for 90% of China’s whole milk powder imports.

But here’s what’s encouraging: April 2025 also saw broad-based export growth to multiple markets—USA (+$38 million), Australia (+$22 million), EU (+$19 million), and Japan (+$19 million).

The strategic question other regions should be asking: How do you build the kind of product quality and consistency that allows premium pricing across diverse global markets? New Zealand’s component-focused approach appears to be a key differentiator.

The Bottom Line: Time to Choose Your Future

New Zealand’s 2024-25 season represents more than regional success—it’s a blueprint for profitable dairy farming in an uncertain world. Component optimization, strategic seasonal management, quality premium positioning, and integrated sustainability create advantages that transcend geography.

But here’s the uncomfortable reality most dairy farmers must face: Your current strategies are probably optimized for yesterday’s markets, not tomorrow’s opportunities.

Key Strategic Shifts Every Progressive Operation Must Consider:

  1. Challenge your payment system: If your cooperative prioritizes volume over components, demand justification with real economic data
  2. Question traditional metrics: Track butterfat and protein percentages as closely as total production
  3. Think like a breeder, not a commodity producer: Strategic sacrifices for long-term positioning often outperform reactive volume-chasing
  4. Build your reputation for quality: Consistent component production creates pricing power
  5. Optimize systems, not components: Align genetics, nutrition, and management for compound advantages

The Brutal Truth About Industry Conventional Wisdom

Most dairy industry “best practices” are designed to optimize processing plant efficiency, not farm profitability. The sooner you recognize this, the sooner you can start building systems that actually serve your economic interests.

New Zealand proved that in today’s dairy markets, farmers who think differently about what matters will consistently outperform those who do traditional things more efficiently.

The Choice Is Simple

You can continue following industry conventional wisdom—chasing volume metrics, accepting commodity pricing, and hoping technology will somehow fix fundamental strategic problems.

Or you can start asking the hard questions:

  • Why does my cooperative pay the way it does?
  • What would happen if I optimized for components instead of volume?
  • How can I build pricing power instead of accepting commodity rates?
  • What strategic advantages am I leaving on the table?

The Kiwi paradox isn’t really a paradox—it’s a roadmap. The question is whether you’re ready to challenge and follow conventional wisdom.

Your Call to Action

This week, schedule a meeting with your cooperative’s management. Ask them to justify their payment system with economic data. Ask why they prioritize volume over components. Ask how their system helps you maximize profitability versus processing plant efficiency.

Then, ask yourself the most important question: Are you running your operation to maximize your cooperative’s efficiency, or are you building a system designed to maximize your profitability?

Because there’s a difference, and New Zealand just showed the world what happens when farmers choose wisely.

The revolution in dairy economics has already begun. The only question is whether you’ll lead it or watch from the sidelines as others capture the premiums you leave on the table.

Learn more:

Join the Revolution!

Join over 30,000 successful dairy professionals who rely on Bullvine Weekly for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.

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New Zealand Dairy Boom: Record Production Meets Sky-High Prices, But What About Profits?

Wednesday, January 29th, 2025

New Zealand’s dairy industry is breaking records, but at what cost? As milk production soars and prices hit new highs, farmers face a complex reality of rising expenses and environmental challenges. Discover how Kiwi dairy farmers are navigating this boom and what it means for the future of global dairy markets.

Summary:

New Zealand’s dairy industry is experiencing a remarkable surge, with milk production reaching 5.84 billion pounds in December 2024, up 1.4% from the previous year. Fonterra’s estimated pay price of $9.50-$10.50/kg of milk solids could set a new record. However, this boom comes with significant challenges. Rising input costs, including feed, fertilizer, and fuel, are eroding profit margins despite high milk prices. Environmental pressures and potential shifts in Chinese demand add further complexity. Farmers are urged to focus on cost management, efficiency, and sustainability to navigate these challenges. While the industry contributes 25% to New Zealand’s export earnings, balancing profitability with sustainability remains crucial for long-term success in an evolving global market.

Key Takeaways:

  • Understand cost of production (COP) thoroughly to make informed decisions on feed purchases and process extensions.
  • Sustainability is vital: adopting eco-friendly practices can secure long-term profitability and market access.
  • Keep abreast of Chinese market trends and adjust export strategies to avoid over-dependence.
  • Invest in technologies that enhance productivity while containing costs for increased efficiency.
  • Develop strategies for financial resilience to withstand global market volatility and rising operational expenses.
New Zealand dairy industry, milk production growth, rising milk prices, production costs challenges, environmental sustainability

New Zealand’s dairy industry is making headlines with Record-breaking milk production and the subsequent rise in milk prices. However, while the numbers look promising, the challenges of increasing production costs (COP), inflation, and environmental issues make the reality more complicated for farmers. Increasing production expenses, inflation, and ecological obstacles indicate that high incomes may not result in significant profits. Let’s explore what this boom means for farmers. 

Record-breaking milk production and rising milk prices 

YearMilk Production (billion pounds)Milk Solids (million pounds)Fonterra Pay Price ($/kg MS)
20235.76568.58.00 – 9.00
20245.84576.59.50 – 10.50

New Zealand milk production reached 5.84 billion pounds in December 2024, up 1.4% from December 2023, marking the highest volume for the month since 2020. Milk solids also increased by 1.4% year-over-year to 576.5 million pounds, with solids for the 2024-25 season up 3.7% compared to the previous year. 

Fonterra, New Zealand’s largest dairy cooperative, recently raised its estimated pay price to $9.50-$10.50/kg of milk solids for the 2024-25 season. If realized, this would be among the highest payouts ever recorded for Kiwi producers. 

While these figures highlight strong market performance, Many farmers note that despite high milk prices, the increasing costs of production and environmental challenges often negate the expected profits, highlighting their complex financial realities. 

Rising Costs of Production: The Profitability Challenge 

Input Cost2020 Price2024 Price% Increase
Feed$398/ton$439/ton10.3%
Fertilizer$578/ton$585/ton1.2%
Fuel$1.16/liter$1.91/liter64.7%

Despite high milk prices, farmers are grappling with rising input costs. Feed, fertilizer, fuel, and labor expenses have all increased sharply due to global inflation and supply chain disruptions. Recent estimates suggest that breakeven milk prices for intensive systems now exceed $6.50/kgMS, leaving little room for profit even with record payouts. 

One farmer shared their perspective:

“We’re nowhere near the profitability we saw pre-COVID. Input costs are insane right now, so margins are tight even with these high prices.”

This highlights a critical issue: profitability is not just about income but also about effectively managing costs, which has become increasingly difficult in recent years. 

China’s Influence on Demand 

New Zealand maintains its dominance in China’s dairy market, boasting a 90% market share for whole milk powder (WMP) imports, as reported by recent trade data. Chinese demand has rebounded due to dwindling domestic milk powder inventories and a declining milking herd. This has helped push WMP prices above $4,000/MT, their highest level over two years. 

However, there are concerns about how sustainable this demand will be. China is investing heavily in its domestic dairy industry to reduce reliance on imports, which could impact New Zealand’s export opportunities in the long term. While Chinese demand is strong, New Zealand farmers should prepare for potential shifts as China ramps up its domestic production capabilities. 

Global Dairy Trade Performance 

The Global Dairy Trade (GDT) auctions have reflected strong demand for New Zealand products. Although WMP prices eased slightly in December and early January, they rebounded at the GDT auction on January 21, 2025, and again at GDT Pulse events. WMP prices now sit at $4,000/MT, while skim milk powder prices have also risen. 

While these price levels are promising, farmers are cautious about over-reliance on short-term market trends, recognizing the importance of addressing long-term challenges like increasing production costs (COP) and market volatility for sustained profitability. 

Environmental Challenges: Balancing Profitability and Sustainability 

The environmental impact of intensified dairy farming is another significant challenge facing New Zealand’s industry. Agriculture accounts for nearly half of the country’s greenhouse gas emissions, with dairy farming being a major contributor. 

Farm nitrate leaching has led to widespread water quality issues across New Zealand, resulting in the implementation of stringent environmental regulations that not only raise costs for farmers but also endanger ecosystems. 

Farmers are under increasing pressure to adopt sustainable practices—not just because they are suitable for the environment but also because they are becoming essential for market access and long-term profitability. Investing in sustainability can help farmers future-proof their operations while meeting regulatory requirements and consumer expectations. 

Implications for Farmers: Be Strategic 

Given the contradictory conditions of high prices and escalating costs, farmers should adopt strategic approaches, such as diversifying income sources, optimizing resource utilization, and exploring sustainable practices to mitigate financial risks and maximize profitability. Blanket recommendations like “buy more feed” or “extend lactation periods” don’t work for every operation because every farm’s financial situation is unique. 

Consider the following considerations for farmers navigating these conditions: 

  • Know Your Costs: Before making decisions like purchasing supplemental feed or extending lactation periods, calculate your cost of production (COP, which includes all expenses related to production) to ensure it is financially viable.
  • Focus on Efficiency: Invest in technologies or practices that improve productivity without significantly increasing costs.
  • Monitor Global Trends: Keep an eye on Chinese demand and GDT auction results but remain cautious about over-reliance on export markets.
  • Plan for Volatility: Build financial resilience by setting aside reserves during profitable periods to weather future downturns.
  • Sustainability Matters: As environmental regulations tighten, adopting sustainable practices now can help future-proof your farm.

Industry Impact and Future Outlook 

While current conditions present opportunities for income growth, profitability remains challenging due to the dual factors of rising costs and market uncertainties. The New Zealand dairy sector contributes around 25% to the country’s total merchandise export earnings, highlighting its economic importance and susceptibility to global market changes. 

Environmental pressures loom large over the industry as consumers and regulators demand more sustainable practices.  Balancing profitability with sustainability will be critical as New Zealand navigates this period of growth.

The Bottom Line 

New Zealand’s dairy boom is a double-edged sword: while high production and prices create opportunities for income growth, rising input costs and inflation mean profitability remains elusive for many farmers. As global markets evolve and environmental challenges mount, Kiwi farmers are at a critical juncture where they must balance seizing opportunities with fulfilling their responsibilities. 

This isn’t just about acknowledging record figures—it’s about understanding how those numbers directly impact farmers’ financial well-being. By prioritizing efficiency, sustainability, and strategic decision-making, New Zealand’s dairy industry can effectively navigate these challenges and build a more resilient future. 

What are your thoughts? Can high milk prices offset rising costs on your farm? Share your experiences and strategies in the comments below to continue this conversation! 

Learn more:

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New Zealand Dairy Boom: Record Production and Payouts Shake Global Market

Wednesday, January 22nd, 2025

Find out how New Zealand’s top dairy production and payments are changing global markets. What does this mean for dairy farmers and industry workers everywhere?

Summary:

In 2024, New Zealand’s dairy industry hit a high point with record milk production, reaching 1.92 billion kilograms of milk solids, a 2.1% jump from 2023. This was helped by better farming practices, good weather in the North Island, and rising global dairy prices, which made products like whole milk powder more valuable. Fonterra, the leading dairy company, plans to pay farmers between $9.50 and $10.50 per kg of milk solids, topping the old record of $9.30. The focus is now on creating high-value items like specialty butter and cheeses, aiming for more sustainable farming. This boom could challenge other countries like the U.S., who might face lower prices and need to adjust how they operate.

Key Takeaways:

  • This record-breaking year in New Zealand’s dairy sector is attributed to favorable weather and enhanced productivity measures.
  • A shift towards high-value dairy products fosters a more substantial market presence and global competition.
  • New Zealand’s dairy dominance could lead to downward pressure on international dairy prices, affecting global competitors.
  • Sustainability and innovation are central to the industry’s ongoing growth, raising questions about long-term environmental implications.
  • U.S. dairy farmers may need to strategize for enhanced competitiveness and resilience in light of these developments.
New Zealand dairy industry, record milk production 2024, global dairy prices, sustainable farming practices, high-value dairy products

In a groundbreaking achievement, New Zealand’s dairy industry reached an unprecedented production peak in 2024, churning out 1.92 billion kilograms of milk solids. This marks a notable 2.1% increase from the previous year’s production levels. The boost is attributed to improved farming methods, favorable weather conditions in the North Island, and higher global dairy prices. The North Island experienced abundant sunshine and rainfall, maintaining green pastures and steady milk production.

Despite excessive rain in some regions of the South Island, the dairy industry’s overall performance remained robust, demonstrating remarkable resilience across different areas. Fonterra plans to pay farmers between $9.50 and $10.50 per kilogram of milk solids for the 2024/25 season, exceeding the prior record of $9.30 per kgMS. These increased payouts not only support farmers in maintaining competitiveness but also have the potential to spur more significant investments and foster the development of new ideas within their farming practices.

Unveiling the Key Factors: Key Catalysts Behind Remarkable Dairy Surge

New Zealand’s dairy industry had a fantastic year in 2024, thanks to various factors that helped it grow. One big reason for this success was better productivity in most farming areas. Farmers used new technologies and innovative farming methods to get more milk from their cows. 

Good weather was also a key factor. The North Island had almost perfect climate conditions during critical months for milk production, especially in October, leading to much higher milk output. 

In addition to these local improvements, strong global dairy prices supported New Zealand’s dairy growth. The world market saw higher prices for essential dairy products like whole milk powder and skim milk powder. These higher prices meant more money for New Zealand’s dairy producers, helping them compete better globally. 

Better productivity, good weather, and strong global dairy prices made this fantastic achievement possible. Together, these factors boosted New Zealand’s dairy industry worldwide. 

Market Momentum: Embracing Value-Added Products and Sustainable Practices

New Zealand‘s dairy industry is changing to meet consumer demands. Producers focus on making high-value products like specialty butter, fancy cheeses, and baby formula. This helps add worth to their products and keeps New Zealand strong in the global market. According to dairy expert Dr. Emily Hart, there is a trend towards producing high-value dairy products. This change gives New Zealand an advantage and shows that the industry can adapt to market changes. 

The industry is also committed to being green. It uses new research and technology to lower its environmental impact while making more products. Fonterra’s use of green practices shows this commitment. Dr. Rebecca Collins, an expert in environmental policy, states, “These green practices show New Zealand cares about the environment and profit.” 

Focusing on high-value products and green methods could strengthen New Zealand’s position in the global market. This strategy would help New Zealand improve its market position and better handle market changes. 

A critical dilemma emerges in balancing maximizing productivity and integrating environmentally sustainable practices. Green farming helps tackle greenhouse gas emissions and water use problems. New Zealand invests in innovation and technology to protect the environment and boost production, helping to meet global standards and consumer wishes for green practices. 

The industry’s future success hinges on its capacity to remain competitive while upholding environmentally friendly practices. New Zealand’s dairy industry might become a model for balancing profit with environmental care, as other countries observe.

The Ripple Effect: How New Zealand’s Dairy Surge Shapes Global Economics and Rivalries

New Zealand’s success in the dairy industry affects countries worldwide, forcing them to consider their strategies. Given New Zealand’s substantial export volume, concerns arise about the potential impact on prices in the United States and other international markets. The U.S., which produces a lot of milk, cheese, and yogurt, may also experience more competition as New Zealand’s unique dairy products become popular. 

Following certain developments, milk production within the European Union has consistently improved, partly influenced by the growth of New Zealand’s dairy industry. Still, New Zealand’s growth could slow the market. European producers must comply with new rules and focus on being more eco-friendly, making it harder for them to maintain their global market share. 

India’s focus is primarily on serving its people. However, New Zealand’s export success could inspire Indian producers to try new strategies and produce more valuable products. Dr. Rajesh Singh, an expert in farming, thinks India could improve its dairy-selling methods by learning from New Zealand.

The Bottom Line

New Zealand’s dairy industry hit a significant milestone in 2024, making a substantial impact on the global dairy market with record production and payouts. The country used better farming techniques and good weather to boost its economy and affect world dairy trends. New Zealand strengthens its competitive edge by focusing on unique products and sustainability. This growth raises essential questions about what it means for other countries, especially U.S. farmers who might face price challenges. As this trend continues, dairy experts worldwide need to talk about strategies. What potential benchmarks could New Zealand’s expansion establish, or what significant transformations might it catalyze within the dairy industry?

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New Zealand Leads Global Charge in Methane Reduction: Insights from the Latest Dairy Innovations

Friday, December 20th, 2024

Explore how New Zealand is leading the charge in cutting methane emissions in the dairy sector. Are groundbreaking vaccines and feed additives the key to a greener future?

Summary:

As global scrutiny on agricultural emissions intensifies, all eyes are on New Zealand—a leader in innovative strategies to curb the methane footprint of its dairy sector. The recent Agriculture and Climate Change conference highlighted crucial advancements in methane mitigation technologies, focusing on vaccines and bolus solutions, with experts like Dr. Harry Clark advocating for their transformative potential. Companies such as Ruminant BioTech, poised to release a bolus by 2025, and ArkeaBio, aiming for a methane-reducing vaccine within five years, represent the forefront of this shift. Their breakthroughs reinforce the importance of sustainable practices, tackling one of the most potent greenhouse gases and providing a blueprint for global adoption. While technological solutions like feed additives, vaccines, and boluses face cost, practicality, and regulatory approval challenges, New Zealand’s progress signifies a significant stride towards reducing enteric methane emissions without compromising the country’s pastoral farming ethos.

Key Takeaways:

  • New Zealand is pioneering efforts in developing a methane-reducing vaccine, targeting natural immunity against methanogenic archaea in cattle.
  • The methane vaccine aims to stimulate cows to produce antibodies in their saliva, reducing methane production without continuous chemical feed additives.
  • Challenges replicating lab successes in real-world cattle rumens, prompting increased investment and global collaboration.
  • Alternative methane reduction strategies include feed additives like Agolin and Brominata, which show promise in controlled emissions reduction.
  • This innovative approach aligns with New Zealand’s agricultural goals and presents potential global implications for reducing agricultural greenhouse gas emissions.
methane emissions, New Zealand dairy industry, climate conference, methane-inhibiting boluses, vaccine research, enteric fermentation, environmental impact, Ruminant BioTech, ArkeaBio vaccine trials, greenhouse gases

New Zealand stands at the forefront of the global mission to combat methane emissions, a critical aspect of addressing climate change that directly impacts the dairy industry worldwide. Recent explorations at the country’s Climate Conference showcased innovative enteric methane mitigation strategies, such as methane-inhibiting boluses with electronic tracking and advancements in vaccine research for natural methane suppression within cattle. These efforts highlight New Zealand’s bold resolve to tackle one of the most potent greenhouse gases, underscored by Dr. Harry Clark’s statement: “We see it as such an attractive and practical way to reduce methane emissions. It would also be cost-effective because vaccines are cheaper to manufacture than feeding something special daily.”

Shifting Gears: The Dairy Industry’s Methane Challenge 

The global dairy industry is urgently under increasing pressure to reduce its environmental impact, particularly methane emissions. Methane, a potent greenhouse gas, significantly contributes to climate change, having more than 25 times the impact of carbon dioxide over a century (EPA). This underscores the critical need for effective strategies to curb emissions in the dairy farming sector. 

The pressure is mounting on dairy farmers. Stricter regulations focusing on sustainability and consumers wanting environmentally friendly products push them to reduce methane emissions. Lowering the carbon footprint has become a competitive edge as consumers become more eco-aware. 

Methane mainly comes from enteric fermentation, a normal digestive process in animals like cows that releases methane as a byproduct. This challenges dairy farmers in terms of maintaining productivity while reducing emissions. This task seems overwhelming given the traditional methods and farmers’ limited budgets. 

Reducing methane emissions involves multiple challenges. Technological solutions such as feed additives, vaccines, and boluses are promising. However, each has hurdles, such as cost, practicality, and regulatory approval. The ongoing research into these tactics offers hope but highlights how complex it can be to put them into widespread use. 

Additionally, creating one-size-fits-all solutions is challenging due to different regional farming methods and climate conditions, which influence how successful these solutions might be. Dairy farmers must navigate these technical and regulatory challenges while staying economically viable—a tricky balancing act demanding innovation, money, and teamwork across the industry. 

To sum up, the issue of methane emissions in the dairy industry involves multiple factors, including environmental and economic pressures. While technological progress offers ways forward, achieving an absolute reduction in emissions requires ongoing effort and flexibility from everyone involved.

Innovating Pasture-Raised Solutions: New Zealand’s Groundbreaking Methane Vaccine 

New Zealand is pioneering a new method of reducing methane emissions, tackling specific issues faced by its dairy industry. Because most of its cattle feed directly from pastures, regular feed-based methods of reducing methane don’t always work well. This has driven New Zealand to innovate a new solution: a vaccine. 

This vaccine idea is promising, especially for countries like New Zealand, where grazing is common. Unlike chemical solutions that require regular feeding, this vaccine would encourage cows to produce natural antibodies that tackle methane-producing germs in their stomachs. This could change the dairy industry by cutting emissions effectively while sticking to traditional grazing methods. 

The potential impact of this vaccine is significant, not only in terms of reducing environmental damage but also in maintaining the strength of the dairy business. By leveraging the cow’s natural processes to reduce emissions, the industry could achieve substantial environmental benefits without incurring high costs. The development of this vaccine marks a significant step towards sustainable dairy farming, positioning New Zealand at the forefront of agricultural technology. As New Zealand continues investing in this promising technology, it demonstrates a clear commitment to a future where reducing farm methane is feasible and prudent.

Leading the Charge: Transformative Insights from New Zealand’s Climate Conference on Methane Mitigation 

The New Zealand Climate Conference was a pivotal event where leading experts discussed innovative ways to make farming more sustainable. A key focus was reducing methane emissions from dairy cattle, a significant environmental challenge. Experts like Dr. Rod Carr and Dr. Harry Clark shared groundbreaking ideas that inspire hope and motivation for a more sustainable future in the dairy industry. 

Dr. Rod Carr highlighted the country’s focus on innovation in farming practices, especially the potential of boluses. He discussed the upcoming tribromomethane bolus, which is expected to hit the market by 2025 and could significantly reduce methane emissions. Carr emphasized how these technologies could be crucial, particularly for New Zealand’s pasture-based farming systems. 

Dr. Harry Clark, the director of the New Zealand Agricultural Greenhouse Gas Research Centre, discussed new vaccine developments. He explained how using the cow’s biological systems could reduce methane production. He shared data showing vaccines can reduce methane by 10% to 15%, supporting the idea that this method could work. His insights highlighted the potential of natural solutions that fit New Zealand’s dairy farming style. 

Carr and Clark showcased an industry ready for significant changes through research and development. Their talks at the conference supported a vision of environmentally sustainable agriculture, balancing new ideas with real-world use in pasture-based systems.

Turning the Tide: Breakthrough Methane Mitigation Technologies Spotlighted at New Zealand Conference

At the recent Agriculture and Climate Change conference in New Zealand, new technologies focused on reducing methane emissions were highlighted. Ruminant BioTech’s methane-inhibiting bolus and ArkeaBio’s vaccine trials are two of the most promising developments. 

Ruminant BioTech is progressing with its bolus, which will soon be available on the market. This bolus uses synthetic tribromomethane inspired by seaweed, which is known to reduce methane emissions. Expected to be released by the end of 2025, the bolus effectively cuts methane emissions. It includes an electronic tag to verify whether cattle have been treated. This innovation is a significant step forward from current methods that rely on feeding cattle special diets. 

At the same time, ArkeaBio is working on vaccine trials to reduce methane emissions from cattle by using the animals’ natural processes. Reports from the conference indicate that this vaccine could cut methane emissions by 10% to 15% in vaccinated cattle. Although the vaccine is still being tested and is expected to be ready for the market within five years, the early results suggest it could change how methane is managed in pasture-raised cattle. These developments show how technology and farming can work together to fight climate change, with New Zealand leading the way in reducing methane emissions from cows. 

Unraveling the Methane Mystique: How Vaccines and Bolus Technologies Aim to Cleanse the Cow’s Breath 

Methane production in ruminants is a natural process in their unique digestive system. At the core of this process are microorganisms called methanogenic archaea. These microbes live in the oxygen-free environment of the rumen and use byproducts from fermentation. When the cow digests its feed, it breaks down carbohydrates into volatile fatty acids, carbon dioxide, and hydrogen. The methanogenic archaea use hydrogen and carbon dioxide to make methane (CH4), which the cow releases through belching, adding to greenhouse gas emissions. 

Tackling the problem of methane emissions requires innovation, such as vaccines and bolus technologies. The vaccine aims to boost the cow’s immune system to create antibodies that attack methanogenic archaea. Researchers focus on specific proteins in these archaea to make antibodies that prevent them from making methane. These antibodies enrich the cow’s saliva, and once in the rumen, they stick to and weaken the archaea, reducing methane emissions [source needed]. 

Alternatively, bolus technology uses direct chemical methods. Companies like Ruminant BioTech have developed a bolus containing synthetic tribromomethane, a compound in some seaweeds that effectively reduces methane production. When taken orally, this bolus releases the compound in the rumen, blocking key enzymes needed to produce methane. This approach suits grazing systems where regular feed additives aren’t practical. 

Both technologies use advanced biological and chemical knowledge to reduce methane emissions, a primary environmental concern in livestock farming. As these methods undergo more tests and trials, they promise to reduce the dairy industry’s carbon footprint worldwide. 

Balancing the Budget: Navigating Economic and Practical Realities in Methane Reduction for Dairy Farming

When examining the costs and practicality of reducing methane in dairy farming, significant factors must be considered. Feed additives and vaccines offer different benefits and challenges. 

Feed additives like Agolin and Brominata are cost-effective in farms where cows eat a standard diet. They help cut methane and improve output. For instance, Agolin costs 4 to 6 cents per cow daily but can save you up to 60 cents in performance boosts. But for grazing farms, like New Zealand, where cows eat as they roam, it’s hard to deliver these feed solutions consistently, making them less practical. 

On the other hand, vaccines seem promising for farms where cows roam. Given once or occasionally, they fit well with grazing patterns and help cows naturally lower methane without daily effort. Although initial research costs are high, vaccines could be a low-cost solution due to cheap manufacturing. Dr. Clark’s push for more investment shows hope for a breakthrough that could change grazing-based dairy farming worldwide. 

Bovaer, 3-NOP, works well in controlled settings but has issues in pasture environments. Its price remains unclear because it is not guaranteed to work across different systems and is waiting for more trials and approval. 

To sum up, cutting methane in dairy farming requires appropriate strategies. While feed additives are helpful in controlled settings, they face logistical problems in grazing. Vaccines, however, could be a sustainable fix for grazing farms if research overcomes its current limitations.

New Zealand’s Methane Innovations: A Global Blueprint for the Dairy Industry

New Zealand is leading the way in reducing methane, and its new ideas are a light on the global dairy industry. These changes could extend beyond New Zealand, offering new possibilities for dairy farms worldwide. Creating a vaccine for livestock that cuts methane emissions could become a helpful tool globally, aligning with growing concerns about farming’s environmental impact. 

Using these technologies in different farming areas requires careful planning. Countries with grazing systems, like New Zealand, might easily use these vaccines and bolus techniques to boost their sustainability. Feed additives could be adjusted to local diets in areas with more intensive feeding systems, effectively combining old and new methods. 

The idea of working together internationally is exciting. Partnerships between research groups and governments could speed up the use of these new ideas worldwide. By sharing research, improving vaccines for different climates, and agreeing on risk measures, a firm plan for reducing methane can be created. 

New Zealand’s achievements might encourage dairy-producing countries worldwide to form teams to share technology and align policies. This teamwork not only boosts the impact of these improvements but also strengthens the industry’s commitment to reducing greenhouse gases globally. As the world tackles climate goals, using New Zealand’s innovations could play a key role in creating a more sustainable future for global dairy farming. 

Navigating Rocky Terrain: Challenges and Innovations in Methane Reduction Technologies

The new technologies for reducing methane show promise but also present challenges. One big issue is ensuring the vaccines work well in real-life farming conditions. Although lab results look good, we must see the same results in the fields, especially in different environments where cows live and graze. 

Using bolus and feed additives is also tricky. Farmers must ensure that every cow gets the right amount, especially when cows roam over large areas. These solutions also need to be affordable for farmers. 

Researchers are working hard to solve these problems. They are trying to improve vaccines so that they work well everywhere. They are also learning more about the tiny organisms in cows that produce methane to improve these vaccines. Companies are creating new technology to ensure that boluses work well and fit into regular farming without costing too much. 

Moving forward, it’s essential to keep investing money and effort into these technologies. Everyone involved in the dairy industry must collaborate to support research and develop trust among farmers who will use these new ideas. 

By facing these challenges and pushing for new ideas, the dairy industry can lead the fight against climate change, offering solutions that could work worldwide. 

The Bottom Line

The efforts discussed in this article show New Zealand’s leading role in reducing methane, setting an example for global agricultural sustainability. The development of vaccines and bolus technologies highlights an innovative approach tailored to pasture-based farming systems. These advancements emphasize New Zealand’s proactive approach and have broader implications for dairies worldwide. As the industry deals with emissions, New Zealand’s methods offer practical solutions that can change farming practices globally. Therefore, dairy professionals must keep up with these new technologies, considering them for possible use in their operations. Doing so aligns them with trends that improve environmental responsibility and economic viability. The future of sustainable dairy farming depends on informed decisions and strategic adoption, making it crucial for stakeholders to stay engaged with ongoing advancements in this field.

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New Zealand Milk Production Surges Amid Rising Farmgate Prices

Monday, December 16th, 2024

Why is New Zealand’s milk production rising along with farmgate prices? What impact does this have on dairy farmers? Uncover key insights and future trends.

Summary:

New Zealand’s dairy industry is experiencing a significant surge in 2024-25 milk output, showcasing resilience after years of challenges. October’s milk solids production shot up, outpacing results from the prior three years, though still not matching the records of 2018-2020. Traditionally, high output triggers low prices, yet Fonterra defies these norms by boosting the season’s farmgate milk price forecast, spurred by demand from China and Southeast Asia, along with a depleted Chinese milk powder stockpile. This sets the stage for a potentially record-breaking year in producer earnings, signaling a transformative era for the industry. The 261,483 kg output is coupled with Fonterra’s forecasted $10/kg farmgate price and a 50ʼ dividend per share, reflecting market shifts and creating new revenue streams. As milk prices soar due to increased international demand, investments in technology and sustainable practices could become more feasible. This highlights a critical juncture for strategic advancements amid global dairy market transformations.

Key Takeaways:

  • New Zealand’s milk output shows signs of recovery, outperforming the previous three years, although still trailing 2018-2020 levels.
  • Despite high milk output, farmgate milk prices have increased due to strong demand, enabling potentially record-high earnings for Kiwi dairy producers.
  • Fonterra’s forecast for improved milk prices is supported by increased demand in China and Southeast Asia, hinting at a possible surge in New Zealand’s dairy exports.
  • The developments suggest a complex landscape where economic conditions, international demand, and strategic foresight influence the dairy market’s trajectory.
  • Dairy industry stakeholders are urged to remain adaptable and proactive to harness emerging opportunities and navigate challenges.
New Zealand dairy industry, milk production growth, farmgate milk prices, Fonterra forecast 2024-25, sustainable farming practices, investment in dairy technology, Oceania dairy market recovery, milk powder exports, intelligent resource management, precision farming techniques

In an exciting boost for New Zealand’s dairy industry, milk production has bounced back, giving hope for substantial outcomes in the upcoming season. October saw a large harvest of 261,483 kg of milk solids, as the Dairy Companies Association of New Zealand reported. This recovery comes with a historic rise in farmgate milk prices. Fonterra raised its forecast for 2024-25 prices to an impressive $10/kg (NZ), with an expected 50ȼ dividend per share. Promising the highest-ever pay rates, up 23.5% from last season, this significant increase could reshape opportunities for everyone involved in the dairy industry, substantially boosting farmers’ income. Higher returns might encourage investment in better farming methods, technology, and sustainable practices. As they deal with these changes, dairy farmers and industry workers must stay aware, taking advantage of opportunities while managing challenges. The world is watching New Zealand’s dairy recovery with great interest, considering the broader effects of this significant turnaround. 

YearMilk Solids (kg)Change (%) from Previous Year
2020-21264,543+3.5%
2021-22260,000-1.7%
2022-23255,678-1.7%
2023-24248,505-2.8%
2024-25261,483+5.2%

Dairy Resilience: A New Era for New Zealand 

New Zealand’s recent milk production increase is a testament to the resilience of its dairy industry after enduring tough times. The Dairy Companies Association of New Zealand reports that during the 2024-25 season, milk solids hit 261,483 kg in October, the peak month for production. This surpasses what was recorded in October 2021, 2022, and 2023, indicating a significant recovery. 

However, it’s important to note that these numbers are still behind those of 2018, 2019, and 2020, reflecting the impact of a three-year slump in Oceania’s dairy industry. When comparing the first five months of the 2023-24 season to the current season, milk collections are up by 5%. Still, they are 1.2% less than in the record-setting 2020-21 season. This situation signals a hopeful recovery and advises dairy farmers and stakeholders to remain cautious and adapt. 

Economic Tides: Navigating the Surge in Farmgate Milk Prices

Let’s examine why farmgate milk prices have gone up. The main reason is the changes in the global market. Fonterra, a big player in dairy, raised its price forecast by 50ȼ to $10/kg (NZ), showing how the market is shifting. 

The key here is the increase in global demand, especially from places like China and Southeast Asia. Because of its production issues, China’s need for more dairy has reduced milk powder reserves. This gives New Zealand a great chance to export more milk powder. In the meantime, Southeast Asia’s constant demand provides a stable base for New Zealand producers. 

The effects on dairy farmers’ earnings are complex. Higher farmgate prices immediately boost income, even beating earlier expectations. This financial gain allows farmers to invest in new tech, sustainability, and growth. Higher prices help cover rising costs, creating a better environment for long-term plans. 

But it’s crucial to remember the risks. Relying on outside markets means being open to sudden changes that might shift expected results. So, even though things look positive now, dairy leaders need to be careful and use these economic opportunities wisely.

International Demand Dynamics: A Dance with Opportunity

As New Zealand manages the ups and downs of international demand, major buyers like China and Southeast Asia take center stage. These regions are key in controlling New Zealand’s dairy exports. 

Once fast-paced, China’s dairy growth is slowing down, creating both a challenge and an opportunity. Too much production and financial losses have been rough for Chinese dairy farmers, known as the “red ink” problem. This term refers to the financial losses incurred by dairy farmers due to overproduction and a subsequent drop in milk prices. The drop in their milk production and lower milk powder reserves hint at changing market dynamics. 

This change offers New Zealand a chance to export more milk powder. Although China’s dairy imports were steady in October, shipments from New Zealand rose, indicating possible future demand growth. 

Southeast Asia adds to this story with a steady demand for high-quality dairy products, strengthening New Zealand’s role as a leading supplier worldwide. As global demands change, they help shape New Zealand’s dairy future, turning challenges into new growth opportunities.

Navigating the New Dawn: Strategic Insights for Dairy Excellence

The current growth in the industry offers New Zealand dairy farmers a chance to improve their business plans. With more demand and higher milk prices, strategic planning is not just important; it’s crucial for lasting success. This empowers farmers to make informed decisions and navigate the changing market conditions. 

Making the Most of High Prices: Since Fonterra has increased farmgate milk prices, farmers should aim to increase their production during this profitable time. Intelligent resource management and upgrading technology can help them get the best value. Investing in automated milking systems could boost production rates and cut labor costs, balancing higher output with lower expenses. 

Boosting Production: It is essential to focus on sustainable methods. Precision farming techniques, such as soil and equipment sensors, can improve resource use and crop yields, which helps raise milk production. Exploring advanced breeding methods to improve livestock quality is also critical. Farmers should consider training to emphasize sustainable practices and keep in line with global trends and consumer needs. 

Finding New Markets: International markets, especially in Asia, are showing increased interest, which could lead to significant growth. Farmers should collaborate with exporters to find new market opportunities and diversify their products to include specialty milk that could appeal to niche customers. Understanding global market trends and consumer preferences is key, and this may involve joining dairy groups that offer insights into international demand. 

In conclusion, by planning wisely, New Zealand dairy farmers can take advantage of the favorable conditions and create a strong base for future success. By building strong production methods and entering new markets, they can benefit now and in the changing markets ahead.

Charting Uncharted Territories: Addressing the Diverse Challenges Beyond Dairy Output 

The landscape of New Zealand’s dairy sector is about more than just how much milk is produced. It also includes challenges like keeping things sustainable for the future. While it’s good news that milk production is bouncing back, hurdles like regulations, environmental limits, and unpredictable global market demands remain. All of these require innovative thinking and quick action. 

First, environmental rules are getting stricter, asking more from farmers to be sustainable. New Zealand dairy farmers must reduce their impact on waterways and reduce methane emissions. With the government aiming for a greener economy, how can dairy farms adjust without lowering milk yields? This is a pressing question as policies change, requiring farmers to stay updated and perhaps change their operations to meet new standards. 

Sustainability isn’t just a regulation issue but also a moral choice. More consumers and investors are watching closely and prefer brands that reduce their carbon footprints. Are dairy farmers using sustainable methods to attract these eco-minded people while still making money? Balancing this could open doors in markets that value carbon-neutral products. 

At the same time, changing global markets adds another layer of difficulty. Fonterra’s hopeful future forecasts depend on worldwide dairy needs and geopolitical issues. With New Zealand’s dairy leaders handling trade deals and tariffs, how ready can the average farmer manage these significant economic changes? Forecasting tools and risk management strategies become critical as international economic trends continue to affect the success of dairy exports. 

In closing, succeeding in this new era requires a well-rounded approach that includes advanced farming methods, compliance with environmental laws, and strong market strategies. Dairy farmers need to think deeply and collaborate with tech companies and policymakers to create new solutions, securing a sustainable and profitable future amid these new challenges.

Technological Transformation: Ushering in a New Era for Dairy Farming 

As the dairy industry changes, new technology is becoming increasingly important. It’s helping farmers improve their work and care for the environment. These advancements are changing how farmers care for their cows and increasing the milk they produce. 

Precision Dairy Farming: The Digital Revolution 

Precision farming technology is transforming dairy operations. Sensors and the Internet of Things (IoT) allow farmers to monitor cow health and behavior in real time. These devices track data like rumination, movement, and milk yield, giving farmers helpful information. For example, sensors on cows can predict health problems early, helping farmers prevent them effectively. 

Smart Milking Systems: Redefining Efficiency 

Milking systems have advanced with automated machines. These systems reduce labor and ensure cows are milked consistently and comfortably. Using data and machine learning, they adjust milking speed and pressure to achieve the best yield and reduce stress on cows. 

Data-Driven Decisions: Harnessing Analytics 

Big data and analytics are now a part of farming, providing dairy producers with new tools. Farmers use data from weather, feed quality, and milk production to make better decisions. Predictive analytics help farmers foresee potential production issues and take proactive steps to improve efficiency and profits. 

Environmental Sensors: Promoting Sustainability 

Environmental sensors are crucial for sustainable dairy farming practices. These sensors monitor soil, crop health, water, and fertilizer use to minimize waste. By using environmental data, dairy farmers can reduce their carbon footprint and increase land productivity. 

In today’s digital world, combining technology with dairy farming is necessary. Accepting these innovations is key to handling rising demand and environmental issues, making New Zealand’s dairy industry a leader in world milk production.

Eco-Conscious Progress: Navigating the Paradox of Dairy Expansion and Environmental Stewardship

New Zealand’s dairy industry is booming, but this growth brings environmental challenges. Producing more milk requires using more natural resources, raising concerns about carbon emissions, water use, and damage to the land. Expanding the dairy industry can boost the economy. Still, it also poses an environmental dilemma, requiring a balance between growth and protection. 

Dairy farming is crucial for New Zealand’s economy, yet it faces the challenge of expanding sustainably. More cows mean higher greenhouse gas emissions, mainly methane, contributing to climate change. High water use for irrigation and cow care can also pressure water supplies, risking depletion and harming ecosystems. 

Dairy farms must shift toward sustainable practices to tackle these issues, aligning economic aims with environmental care. Better manure management, for example, can help. Farms can invest in biogas technology to turn waste into energy, reducing methane emissions and creating a renewable power source. Precision farming techniques using data and smart devices can optimize water and feed usage, reducing waste and the impact on nature. 

Sustainability must be a core part of dairy farming. Techniques like rotational grazing and soil care can reduce carbon output and keep pastures healthy. Farmers can breed more muscular, more efficient cows using fewer resources per animal through better genetic selection. 

Working together is vital for lasting success. Government rules, industry standards, and raising consumer awareness are pushing the move toward more sustainable farming. Dairy businesses should be open about their green initiatives, teaching others and sharing their progress. As caretakers of the land, dairy companies must innovate and lead in sustainability, ensuring success doesn’t harm the planet.

Pioneering the Dairy Frontier: Embracing Tomorrow’s Challenges and Opportunities

New Zealand’s dairy industry faces various factors that could shape its future. From market changes to new technologies, the industry is ready for change. One big trend is the growing consumer demand for sustainability and traceability. Around the world, people are more aware of how products are made and their environmental impact. This shift towards ethical consumption will likely push New Zealand’s dairy sector to improve sustainability practices and adopt technologies that reduce emissions and better manage waste. 

Beyond consumer trends, market changes, especially in Asia, might continue to play a significant role. Asia continues to be a strong growth market for New Zealand’s dairy exports, with countries like China and Southeast Asia needing more dairy as their economies grow and diets change.  New Zealand might focus more on high-quality products as these markets increase demand, requiring a strategic look at premium dairy products. 

Innovation will be key to the industry’s future. Technological advancements, such as technology that boosts milk quality and productivity and blockchain for tracking products in the dairy supply chain, are set to change dairy farming in New Zealand. Investing in research and development will increase efficiency and make Kiwi dairy products stand out globally. 

Yet progress will come with challenges. Balancing growth and environmental care might require new industry policies and teamwork. Stakeholders must work with responsibility and a shared vision for sustainable growth. 

In summary, the future of New Zealand’s dairy industry looks promising. Still, it depends on adapting to changing consumer needs and market demands and using new technologies. By embracing these trends, New Zealand’s dairy sector can lead in quality and sustainability, paving the way for prosperity and resilience. 

The Bottom Line

New Zealand’s recent increase in milk production shows a strong comeback, highlighting the dairy sector’s ability to bounce back. With the highest-ever milk prices for farmers, thanks to strong demand from China and Southeast Asia, dairy farmers face significant economic opportunities. This growth is due to strategic and technological improvements while also trying to balance expanding and protecting the environment.

However, as we celebrate these successes, essential questions must be answered. How will New Zealand’s dairy farmers keep changing and innovating as global demand shifts? What sustainable practices will they focus on to ensure the sector lasts and stays ecologically responsible? The future of New Zealand dairy farming presents challenges and opportunities, urging industry leaders to find solutions that balance economic success with caring for the environment.

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Dairy Dollars Surge: How New Zealand’s Industry Powers Economic Growth

Tuesday, October 15th, 2024

New Zealand’s dairy industry fuels economic growth. Ready to learn about its billion-dollar impact?

Summary:

In the complex landscape of New Zealand’s dairy sector, where high interest rates and fluctuating milk prices have dominated headlines, there’s finally a glimmer of hope. Increased milk prices and strategic economic adjustments, as highlighted by industry leaders like Fonterra and DairyNZ, are expected to invigorate both the dairy industry and the broader economy. The anticipated revenue boost is crucial, increasing New Zealand’s dairy sector revenue by $640 million this season, allowing farmers to invest more securely in critical farming essentials such as feed and technology. This expected rise in economic activity, projected at $1.4 to $1.7 billion, underscores the dairy industry’s vital role in ensuring economic stability within the country. However, the growth story is not just in numbers; it’s in the farmers’ adaptability to cost changes, weather, and policies, highlighting their resilience. New Zealand’s dairy sector finds itself at a pivotal moment, offering new opportunities and challenging farmers to rethink strategies for sustainability.

Key Takeaways:

  • The New Zealand dairy sector is poised for a remarkable $640 million boost in direct revenue, potentially invigorating the broader economy by up to $1.7 billion.
  • The latest season’s predicted average milk price increase to $9.18 per kgMS signals renewed financial stability and opportunities for growth.
  • DairyNZ’s breakeven milk price remains steady, indicating that cost management is crucial as the sector edges towards surplus.
  • A recent OCR rate cut by the Reserve Bank to 4.75% suggests greater financial flexibility for farmers, promising long-term benefits and economic reinforcement.
  • Weather conditions present mixed outcomes: positive on the North Island and challenging in the South, reminding farmers to be adaptive and resilient.
  • Despite uncertainty in international markets and climate variability, a cautiously optimistic future for dairy farming in New Zealand seems achievable.
New Zealand dairy industry, milk price projections, Fonterra cooperatives, DairyNZ Econ Tracker, dairy revenue increase, dairy farmers investment, processing services demand, dairy logistics improvement, economic impact dairy sector, sustainable dairy farming practices.

With the economy in flux, New Zealand’s dairy farmers face several issues, including high borrowing rates, increased costs, and unpredictable milk prices. These obstacles keep coming up, making stability seem out of grasp. But, hey, there’s a bright side coming ahead. Milk prices have risen recently, but things are looking up with some positive economic news on the horizon. This positive news provides immediate relief and discusses how the dairy business can help New Zealand’s economy flourish. The anticipated increase in milk prices may spark new economic activity, delivering positive emotions from dairy farmers to the entire economy.

Hope on the Horizon: Navigating Economic Waves in New Zealand’s Dairy Sector 

The dairy business is adapting to economic developments. Farmers face high borrowing rates, growing input costs, and unexpected fluctuations in milk prices. Hello, some excellent news is coming up: Primary cooperatives such as Fonterra are raising their milk price projections, which is undoubtedly a welcome relief. Fonterra announced a midpoint price of $9 per kgMS and a special dividend payout, which benefits suppliers.

The September update from DairyNZ’s Econ Tracker appears optimistic regarding revenue expectations. New Zealand’s dairy sector will see its total revenue increase from $16.36 billion to $17 billion in the 2023-24 season, a significant revenue increase of $640 million. These figures demonstrate how crucial the sector is to farmers and the larger New Zealand economy.

Unlocking Economic Potential: Enhanced Revenue Fuels Sectoral Growth

Dairy farmers are enjoying a significant revenue increase as milk prices rise, giving them more money to spend. This cash boost allows farmers to invest more securely in their jobs, which benefits everyone. Consider how this new power relates directly to purchasing essential farming materials, such as feed, fertilizer, and the latest farming technology. These expenditures do more than keep things going; they can significantly increase productivity and efficiency in the field.

Farmers are seeing an increase in the demand for processing services as they spend more on quality and innovation in their operations. Producing more milk necessitates higher processing abilities, significantly improving industrial employment and job opportunities. Furthermore, increasing dairy output needs improved logistics for locally and internationally transporting products. This demand propels the transportation industry, bolstering the economy through new job creation and infrastructure development.

It’s critical to look into how this spending affects the economy as a whole. Every dollar farmers spend on supplies, improving processing capacities, or expanding logistics generates additional economic activity. This spending cycle significantly impacts local businesses, job creation, and economic growth.

The Ripple Effect: Dairy Echoes Across New Zealand’s Economy

The dairy business significantly impacts New Zealand’s economy, just as ocean waves pound every beach. We’ve investigated it, and it appears that economic activity will increase by $1.4 to $1.7 billion shortly, so it’s worth watching. Why is this industry so vital, even when the economy is slow?

Consider the dairy industry’s multiplier effect. Every dollar from the industry is like a farmer planting seeds in fertile soil. The industry’s impact extends beyond the farm gate, supporting various sectors such as farming supplies and transportation services. This interconnectedness creates additional jobs and opportunities, demonstrating the industry’s pivotal role in the New Zealand economy.

The dairy industry’s economic activity is not isolated; it provides a reliable support system during economic slowdowns. Unlike the volatile ups and downs of the technology or service industries, the dairy industry’s cycles are consistent. It is a firm foundation for New Zealand’s economy, demonstrating its resilience and stability.

Let’s relax for a bit and consider employment. The dairy business generates many jobs, both directly and indirectly. It helps keep rural towns vibrant and financially sound, especially when cities become overcrowded and expensive. Dairy binds the country together and ensures that everyone grows equally.

But wait, there’s more to the dairy growth story. It’s more than just numbers. It’s all about adapting to changes in costs, weather, and policies. Farmers demonstrate their tenacity by constantly seeking new methods of sustainability. Their resilience is truly inspiring.

The dairy industry is still vibrant. It’s all about New Zealand’s atmosphere and what sets it apart. As the economy experiences ups and downs, the dairy business demonstrates that growth is achievable despite uncertain circumstances. Its adaptability is a reassuring sign for the future.

Surplus in Sight: Dairy Farmers Poised for Prosperity

According to DairyNZ’s most recent breakeven milk price projection, which is around $8.15 per kgMS, dairy producers’ financial situation is improving. The breakeven point is when a farmer covers all operational costs, which anyone in the dairy industry must understand.

What’s intriguing is the noticeable difference between the predicted average revenue and the breakeven point. Farmers anticipate a probable excess, with the predicted milk price at $9.18 per kgMS. This additional revenue could help many farmers get back on their feet.

This extra money has the potential to alter the situation significantly. How about it, you ask? First and foremost, when farmers generate more money, they can finally address the maintenance concerns or investment plans they have been putting off, thereby increasing farm production. Next, more cash allows farmers to reinvest in technologies and practices that significantly improve farm efficiency and sustainability.

Furthermore, excess income does not just sit at the farm gate. It connects to the larger local economy. Prepare for increased demand from agricultural technology suppliers, equipment manufacturers, and service providers. This ripple effect demonstrates how interconnected the dairy sector is to the rest of the economy, making everyone feel part of a larger community.

This positive financial picture is based on expenditure, which can promote economic activity, spark innovation, and even create jobs throughout the dairy supply chain. Everyone benefits from this economic vitality, demonstrating the importance of dairy to the New Zealand economy.

Strategic Relief: Reserve Bank’s Rate Cut Offers New Opportunities for Dairy Farmers

The Reserve Bank has just cut the Official Cash Rate (OCR) by 50 basis points to 4.75%. This is a wise decision to alleviate the financial burden on industries such as dairy farming, where excessive borrowing rates significantly impact farmers’ income. Farmers often pay less each month for their loans when interest rates fall. This allows them more money to keep or reinvest in their operations, such as purchasing more feed, improving their equipment, or growing their business.

Lowering the OCR will undoubtedly benefit dairy farmers, who typically have large loans. It will also allow consumers to be more flexible with their budgets, simplifying the management of those bothersome high interest rates. So, while the rate drop sounds fantastic and immediately angers everyone, it may be some time before we feel the advantages in our daily lives. When monetary policy changes, particularly those involving interest rates, it typically takes some time for those changes to propagate across the financial system.

Farmers will likely experience a more evident impact on their borrowing costs during the 2025/26 season. Banks take time to adjust their lending rates in response to central bank policy, which is why we are witnessing such a gradual shift. They must keep up with changes in farmers’ existing and new loan alternatives. Meanwhile, farmers can take advantage of lower interest rates by thinking optimistically and planning.

Regional Dynamics: Weathering the Storms and Harvesting Opportunities

New Zealand has numerous variations in how grass grows and how much milk is produced by location. Farmers in the north have a lovely time with a steady milk supply, thanks to excellent grass growth and ample feed supplements. These regions are fully prepared as the year concludes and Christmas approaches.

On the other hand, the South Island has an entirely different vibe. The crazy wet weather has significantly impacted Otago and Southland. Farmers in these areas are coping with more than immediate damage; they also have difficulty acquiring feed and restoring their infrastructure. The severe rain has disrupted the paddocks, delaying grazing and reducing crop yields, throwing a kink in the overall productive cycle.

DairyNZ and other support groups are helping the areas facing these complex problems. They strive to help farmers recover swiftly and receive the long-term support they require, ensuring they have the resources and expertise they need to prosper. These groups collaborate to aid recovery efforts, mitigate negative consequences, and promote a steady recovery in the hardest-hit areas.

Weathering Uncertainty: Embracing Adaptability for a Stable Dairy Future

Dairy farming constantly changes; you should expect market and weather fluctuations to persist. Commodity markets worldwide can shift swiftly, influenced by global variables that no single farmer can control. Weather may be somewhat unpredictable, particularly in areas like New Zealand. It can shift swiftly, affecting grass growth and feed availability.

These ups and downs underline the importance of flexibility for dairy farmers. Being prepared to respond rapidly to these developments can separate you from those who get by. Planning, monitoring market trends, and investing in sound farming techniques can help farmers cope with the ups and downs of weather and market fluctuations.

Being prepared is critical, especially given the uncertainty surrounding international trade and weather conditions. Farmers should retain an open mind and roll with the punches, viewing change as a necessary part of the farming game. Suppose the dairy sector adapts and remains adaptable. In that case, it can deal with these uncertainties, assuring a stable future while benefiting the New Zealand economy.

The Bottom Line

Looking ahead for New Zealand’s dairy sector, it is clear that the predicted revenue boost will provide a welcome change of pace. The predicted increase to $17 billion is about more than just producing money; it demonstrates the dairy industry’s importance in keeping the economy robust. This progress demonstrates that not only is the financial situation improving, but the industry is also becoming increasingly adept at adapting and performing well in the face of change. We should consider what these positive developments signify for everyone concerned. Consider how these minor steps spur innovation and growth outside the farm, making dairy farming more resilient and assuring its continued importance to New Zealand’s economy. Let us use these developments as an opportunity to refocus on sustainability and wise improvements, ensuring that our dairy business thrives regardless.

Learn more:

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Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations. 

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Dairy Market Dynamics: Key Insights on Global Milk Production, Export Trends, and Price Movements

Thursday, September 26th, 2024

Get critical insights on milk production, exports, and prices. How will these affect your dairy business? Read our expert analysis now.

Summary:

The dairy industry is amid significant shifts and uncertainties. In August, New Zealand’s milk solids production increased by 10%, while U.S. headline milk production dipped slightly by 0.1% but saw a component-adjusted rise of 1.8%. On the downside, New Zealand’s exports and Chinese imports fell short of expectations, declining by 13% and 2.8%, respectively. The market’s behavior has been erratic: Whole Milk Powder (WMP) prices rose more than anticipated, yet prices for most other products have remained steady or dropped. U.S. butter stocks exceeded forecasts again, even as illnesses like bird flu and Bluetongue pose risks to production in various regions. Are we witnessing a market pause before a final bullish push, or have we passed the peak? The answer may vary by product and region.

Key Takeaways:

  • New Zealand’s milk solids production showed a robust increase of 10% in August.
  • U.S. milk production slightly decreased by 0.1%, although component adjustments indicated a 1.8% rise.
  • New Zealand’s exports fell by 13% in August, signifying lower-than-expected performance.
  • Chinese imports weakened, dropping by 2.8% in the same period.
  • GDT Pulse saw a notable increase in whole milk powder prices, contrary to the steady to lower trends for other products.
  • Concerns about unsold butter stocks continue, with U.S. butter stocks in August larger than anticipated.
  • The U.S. cheese market experienced turbulence, with buyers stepping back, leading to falling prices for blocks and barrels.
  • NFDM/SMP prices softened in both the U.S. and EU, signaling a bearish shift in market sentiment.
  • Seasonal and global factors such as bird flu in California and Bluetongue in Europe affect production and market stability.

Imagine sailing a ship through choppy waves; that’s how the dairy market feels. Milk output is increasing in specific locations while decreasing in others. Export patterns are altering, with unanticipated changes in essential markets such as China and New Zealand. Prices? They are fluctuating more than ever. Understanding these processes is not simply necessary; it is critical. This article will examine the most current worldwide milk production figures, export patterns, and price variations. Let us get you ahead of the curve.

CategoryRegionChangeRemarks
Milk Solids ProductionNew Zealand+10%Better than expected
Headline Milk ProductionU.S.-0.1%Component adjusted +1.8%
ExportsNew Zealand-13%Weaker than forecast
ImportsChina-2.8%Weaker than expected
Butter StocksU.S.N/ALarger than forecast

Milk Production Trends: Navigating the Shifts in New Zealand and the U.S. 

As we look at worldwide milk production patterns, two key areas stand out: New Zealand and the United States. Recently, New Zealand recorded a remarkable 10% rise in milk solids output in August. This increase in production is more than just a figure; it is a vital sign of the country’s thriving dairy industry, which continues to set the pace for global milk supply.

In contrast, headline milk output fell 0.1% in the United States in August. However, when controlling for components, the image changes, suggesting a 1.8% gain. This complex change shows that U.S. milk’s quality and richness have increased, although total volume may seem stable.

What do these developments mean for the worldwide market? With New Zealand boosting production, milk prices might fall as supply matches or surpass demand. However, the situation in the United States adds another degree of difficulty. The rise in component-adjusted production suggests that the United States may compensate for volume by producing higher-value goods, such as premium cheeses and specialized dairy components.

These processes have various geographical implications. For example, rising New Zealand exports may pressure European markets, increase competition, and change price tactics. Meanwhile, the U.S. market’s emphasis on quality over quantity may position dairy goods as a specialty, premium offers, shielding them from worldwide price volatility. This means that even if the overall volume of U.S. dairy exports remains stable, focusing on high-quality products could potentially drive up prices in specific markets.

Overall, the interaction between volume and value in these crucial areas emphasizes the significance of strategic manufacturing and marketing. Dairy farmers and industry experts should pay particular attention to these patterns, as they will likely affect market movements and opportunities in the coming months. By staying focused and adapting your strategies, you can confidently navigate the changing dairy market.

Global Trade Dynamics: New Zealand’s Export Decline and China’s Import Drop

New Zealand’s latest export statistics indicate a dramatic 13% fall, surprising many, considering the market’s usually positive outlook. What does this signify for the world supply? Dairy goods from one of the world’s top suppliers are becoming more scarce.

Meanwhile, China’s imports have dropped by 2.8%. While this may seem minor initially, it has far-reaching repercussions when considering China’s status as a significant dairy consumer. A drop in Chinese demand might indicate shifting consumer habits or economic forces.

What does the combined dynamic of decreased exports from New Zealand and lower imports into China mean for global supply and demand? For starters, if supply exceeds demand, the market may soften. This change may temporarily lower prices for dairy customers. On the other hand, manufacturers may face narrower margins and financial constraints.

Unexpected Surges Amidst a Shifting Dairy Market: Analyzing Whole Milk Powder’s Leap 

The latest pricing fluctuations in the dairy sector have caused quite a commotion. Whole Milk Powder (WMP) has seen an unexpected price increase on the world stage, contradicting industry expectations. This increase in the GDT Pulse index has left many questioning if we’ve entered a new market trend or whether this was an outlier. Other dairy goods, like cheese, butter, and powders, have consistently reduced costs, indicating a change in the market.

Why did WMP grow when others stagnated or even declined? Let’s look at some critical elements. First, New Zealand’s milk solids output increased by an astonishing 10% in August. While additional supply might cause downward pressure, worldwide demand for WMP from developing markets may have absorbed this extra volume, sending prices upward. In contrast, component-adjusted milk output in the United States increased by 1.8%, showing adequate supply levels.

However, the broader market may be cooling down. Cheese, for example, saw U.S. stocks fall 6.4% from the previous year, and lower-than-expected August statistics did nothing to boost sentiment. Buyers backed off, lowering prices for blocks and barrels as offers dried up.

Butter prices also fell, finishing at $2.79 ($6,150/M.T.) on the CME, the lowest level since March. Market observers may ascribe this to a variety of things. One explanation is that domestic demand was front-loaded early this year, resulting in less hunger today. Furthermore, larger-than-expected U.S. butter supplies in August boosted the perception of a well-supplied market, reducing pricing pressure.

Powders, notably NFDM and SMP, have softened in the U.S. and E.U. markets, with CME futures taking a significant knock. Since the beginning of September, attitude seems to have moved to a pessimistic stance. This shift may be attributed to lower global trade dynamics, as seen by New Zealand’s 13% export reduction and a smaller-than-expected 2.8% drop in Chinese imports.

These dairy market fluctuations indicate that, although specific sectors, such as WMP, are experiencing unexpected growth, others are dealing with supply and demand adjustments. Is the market merely pausing another boom, or have we reached the peak? Only time will tell—along with rigorous monitoring of output, stockpiles, and global commerce.

Market Sentiment: Breather or Peak? 

Let’s discuss the market mood. Are we merely taking a break before another push higher, or have we reached the peak? Currently, it’s a mixed bag. U.S. butter supplies were higher than predicted in August, possibly due to a spike in domestic demand. That is hardly the bullish signal that many were expecting.

However, there is more at play. Bird flu is quickly spreading across California, which is a significant concern. The same is true for Bluetongue in Europe. These variables will undoubtedly impact output and, as a result, pricing in the future. While specific markets may be slowing down, others may experience more activity.

The critical issue is whether we’ll see another spike or settle down. It’s a difficult decision. On the one hand, the continuous year-end Christmas demand usually results in higher pricing, as consumers tend to buy more dairy products during this festive season. On the other hand, rising stock levels, notably in butter, signal that the market may have peaked and is now poised to rebalance.

So, we are at a crossroads. Is this the quiet before the storm or the start of a plateau? Only time will tell, but remaining watchful about these vital aspects is essential for making educated judgments in the coming months.

U.S. Cheese Market in Flux: Buyer’s Strike Creates Uncertainty 

The current state of the cheese market in the United States has several opportunities for analysis. Recently, U.S. cheese purchasers took a considerable step back, effectively going on strike. This move reflects strategic prudence due to dropping pricing for cheese blocks and barrels. Rising offers and a noticeable lack of bids mainly caused this week’s fall. The attitude indicates resistant purchase behavior as buyers wait for better market circumstances.

New figures show that U.S. cheese supplies were 7 million pounds fewer than expected in August. They fell by 6.4% from the previous year, which was accentuated by the downward adjustment in July. This decline points to a more precarious supply position than previously thought. Lower supply typically raises prices, but the present buyer strike has disturbed this natural market reaction.

So, what does this imply for the U.S. cheese market? Lower stock levels often indicate increased market pressures, which might contribute to future price recoveries. However, the current price situation may worsen if buyers stay on the sidelines. The power dynamic has altered somewhat; sellers are dealing with demand uncertainty.

The market is tug-of-war between current supply limits and buyer reluctance. As we proceed, the price volatility risk remains substantial, determined by how soon and to what degree buyers re-engage. The cheese market in the United States may continue to be volatile due to changing purchasing habits and underlying supply dynamics.

Butter Market Puzzles: Is the Seasonal Trend Buckling? 

Turning our focus to the butter market, recent developments have left many industry observers perplexed. CME spot butter ended Thursday at $2.79 ($6,150/M.T.), its lowest price since early March—a notable development given seasonal tendencies. Typically, we anticipate butter prices to climb as we approach the end-of-year holidays due to increasing demand.

But what’s behind this surprising decline? One potential reason is that domestic demand was higher than usual this year. Perhaps customers stockpiled up significantly earlier this year, expecting price increases and supply chain problems that still need to materialize. Consequently, a slowdown in buying may be placing downward pressure on pricing.

The future of the butter market remains to be determined. Seasonal tendencies indicate that costs should rise as Christmas baking and cooking increase. Still, current market dynamics raise doubt about this tendency. Factors such as current avian flu outbreaks in California and bluetongue in Europe may affect supplies further, possibly hiking prices.

However, we must also examine whether the market is resting before another upward surge or if we are nearing the conclusion of a bullish cycle. Late-year demand will be critical to monitor. Will customers empty their stashes, forcing fresh purchases, or have we reached a corner?

Powder Market: Shifting Sands and Emerging Challenges 

Powders have also seen notable changes. The costs of nonfat dry milk (NFDM) and skim milk powder (SMP) have fallen in both the United States and the European Union. This isn’t just a slight adjustment; CME futures have dropped significantly over the last two days, signaling a substantial shift in market opinion. Since September, the prognosis has shifted to the pessimistic side, particularly in the U.S. This move raises various issues.

Are purchasers speculating on future oversupply? Perhaps recent production increases in New Zealand and the United States have addressed some of the supply limitations that had previously driven prices higher. How does this affect dairy producers and suppliers?

Price cuts may have a double-edged effect. On the one hand, reduced prices may stimulate demand, clearing stockpiles. However, as input prices rise, manufacturers may face narrower margins. If prices continue to fall, stakeholders must plan for probable financial difficulties or seek cost-cutting strategies to retain profitability.

The hostile move indicates deeper market concerns about maintaining higher prices in the face of variable output and unpredictable demand patterns worldwide. If these price declines shake market confidence further, we may witness a market correction or a longer-term trend. Only time—and the forthcoming Christmas demand—will tell if this negative mindset persists or shifts back to positive.

Seizing Opportunities in a Complex Market: Your Game Plan 

The present market dynamics are complex, but if you look at your business, you will find several chances. Begin by adequately controlling expenses, such as bulk purchasing feed and conserving energy. Diversify your goods beyond milk, explore using technology to increase production, and keep up with market developments. Create financial resilience via contingency savings and avoid high indebtedness. Finally, prioritize quality; better items often result in higher pricing and more devoted consumers. In 2024, flexibility and proactive initiatives are more than just buzzwords; they are required to be competitive in the ever-changing dairy industry. Stay aware and agile, and always seek operational efficiencies.

The Bottom Line

The present dairy sector environment shows a combination of stronger-than-expected milk output in New Zealand and the United States, comparatively weak Chinese imports, and volatile commodity prices. The strike in the U.S. cheese market and the sudden fluctuations in butter and powder pricing show the unpredictability of dairy markets. Consider how these trends may affect your daily operations and bottom line as the year advances. Are you ready to negotiate these changes, or must you adapt your methods to remain ahead? The future of the dairy industry depends on our capacity to adapt and make sound choices. What actions would you take to guarantee that your firm flourishes in the face of global market fluctuations?

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New Zealand Dairy Powerhouse: Record Milk Production and Rising Profits

Wednesday, September 25th, 2024

New Zealand’s dairy industry is setting new records with increased milk production and higher profits. What does this mean for dairy farmers and the market?

Summary:

New Zealand‘s dairy sector is experiencing significant growth this season, with milk production and solids up 7.6% and 8.3%, respectively. This growth is fueled by favorable weather in the North Island and a strong performance by Fonterra, which has announced increased milk prices and substantial dividends. August saw a rise to 2.9 billion pounds of milk due to ideal conditions, and Fonterra’s final milk price for 2023-24 at $7.83/kgMS, with a proposed 55¢ dividend. The updated Farmgate milk price for 2024-25 is expected to range between $8.25 and $9.75/kgMS. The industry is set for continued prosperity with rising global dairy prices and free trade agreements.

Key Takeaways:

  • Milk production in New Zealand is up by 7.6%, and milk solids are up by 8.3% compared to the previous season.
  • Fonterra announced a final milk price of $7.83/kgMS for the 2023-24 fiscal year, with a dividend of 55¢ per share.
  • The forecasted farmgate milk price for 2024-25 ranges from $8.25 to $9.75/kgMS, indicating a positive outlook.
  • New Zealand dairy prices are rising, driven by global market trends, with recent skim and whole milk powder prices hitting significant highs.
  • Focus on the business-to-business segments of Foodservice and Ingredients suggests strategic shifts within Fonterra.
  • Producers are experiencing higher paychecks due to favorable market conditions and increased milk production.
New Zealand dairy industry, milk production increase, Fonterra milk price, dairy profitability 2023, global dairy market, free trade agreements, skim milk powder prices, dairy employment New Zealand, geopolitical impact on dairy, Kiwi farmers profits

Have you ever wondered what it takes to produce approximately 2.9 billion pounds of milk monthly? That is precisely what New Zealand’s dairy farmers did in August, setting a new industry standard that is not just impressive, but also significant. Furthermore, milk solids increased by more than 10% over the same month last year. Kiwi dairy farmers are reaping the rewards of their hard work, as shown not just by statistics. What does New Zealand’s increasing milk output and profitability imply for you and your business?

MonthMilk Production (Billion Pounds)Milk Solids (Million Pounds)YoY Change in Milk Production (%)YoY Change in Milk Solids (%)
August 20232.66248––
August 20242.92739%10%

Three Months In New Zealand’s Dairy Sector Breaks Records

Only three months into the milking season, there has been a considerable increase in output—milk production is up 7.6%, and milk solids are up 8.3% from the 2023-24 season. That’s a massive jump for the industry!

To put things in perspective, Kiwi cows generated roughly 2.9 billion pounds of milk in August alone. That is a massive 9% rise over August 2023. Milk solids increased by 10% from the previous August, reaching over 273 million pounds. According to Dairy Market News, the increase in output is primarily attributable to excellent weather conditions on the North Island.

These figures are more than statistics; they represent New Zealand’s dairy sector’s strength and promise. With such encouraging data, producers have reason to be enthusiastic this season.

Ideal Weather: The Secret Sauce Behind North Island’s Milk Surge 

What’s causing the fantastic increase in milk quantities, particularly on the North Island? It is primarily due to the weather, a factor that we should all appreciate. Favorable weather can make or break a season, and Mother Nature has been exceptionally kind this year. The mild temperatures and abundant rains have created an excellent climate for pastures to thrive. Good pastures result in healthy and productive cows, and this is a significant factor in the industry’s current success.

You know how a rigid feeding regimen might affect milk supply, right? The natural availability of high-quality fodder has decreased the need for additional feed, saving farmers money and providing cows with better diets. This combination of high-quality pasture and cheaper feed costs paves the way for greater milk output.

Furthermore, a consistent environment decreases stress for the animals. More constant circumstances result in fewer extremes, which may harm a herd’s health and output. Happy, healthy cows generate more milk. It’s a simple yet profound equation: more excellent weather = higher pastures and milk yield.

Imagine running a dairy farm without regularly dealing with adverse weather. This degree of consistency significantly contributes to the record-breaking productivity we are seeing. Consequently, New Zealand’s good fortune with the weather has immediately translated into larger tanks and better yields.

More Milk, More Money: Fonterra’s Record Payout to Kiwi Farmers

It’s no secret that more production frequently results in bigger paychecks, and this season’s record-breaking productivity is no exception. Let us break it down: Fonterra has set a final milk price of $7.83 per kilogram of milk solids (kgMS) for the 2023-24 season, a strong figure already indicating excellent profitability. In addition, the company is proposing a 55¢ dividend per share, potentially increasing total profits to $8.38/kgMS for producers.

CEO Miles Hurrell expressed his satisfaction, stating, “Despite a drop in earnings from fiscal year 2023, we maintained the positive momentum in fiscal year 2024 and delivered earnings at the top end of our forecast range” [source]. The cooperative’s method is paying off handsomely for Kiwi dairy producers.

Looking Ahead: What’s Driving the Updated Farmgate Milk Price for 2024-25? 

What is driving the latest farmgate milk price for the 2024-25 season, which is expected to range between $8.25 and $9.75 per kgMS? The results show a 50¢ gain at both ends of the spectrum, indicating a surge of confidence in the business. But there’s more to this tale.

For Fonterra, this pricing approach is more than simply good fortune. It demonstrates a robust and strategic emphasis on their B2B areas, such as Foodservice and Ingredients. By focusing on these high-margin sectors and divesting some of its worldwide consumer brands, Fonterra hopes to improve its financial health and provide even higher returns to its members.

So, what exactly does this imply for you? Higher prices indicate more active markets and demand, resulting in more significant wages. North Island’s output miracles may become the norm if weather conditions remain favorable. That’s not just excellent news; it’s a bright future for dairy producers trying to make the most of their efforts.

Global Trade Winds: Navigating New Zealand’s Dairy Boom

The global dairy market is dynamic and constantly evolving. With its recent increase in milk production, New Zealand plays an important role. Have you considered how international trade agreements and geopolitics influence our industry?

New Zealand’s global influence is also evident in its free trade agreements, including those with China and the Pacific Alliance. These agreements provide access to markets with lower tariffs and restrictions, a significant advantage in the complex dairy sector. For example, tariffs imposed by Middle Eastern nations on European Union (EU) dairy exports create opportunities for New Zealand to fill the gap, demonstrating the country’s global reach in the industry.

However, not everything is smooth sailing. Geopolitical disputes between key global entities such as the United States and China increase market instability. These conflicts may impact everything from taxes to shipping routes, disrupting trade operations. Nonetheless, New Zealand’s dairy industry has proven its resilience, successfully navigating these rough seas and enhancing its worldwide status. This resilience should reassure us all about the industry’s future.

But how does New Zealand’s dairy industry rank globally? The island country is famous for its high-quality, grass-fed dairy products, which have grown very popular. Countries turn to New Zealand for quantity and quality, particularly whole milk powder and butter.

In a situation where global demand for dairy is expanding, New Zealand’s capacity to produce more milk while strengthening trade links puts it in a strong position. The potential for future growth is exciting, especially when other areas struggle with decreased production. This optimistic outlook is something we can all look forward to.

Will New Zealand continue to set records and surpass its competitors? Only time will tell, but the present signs seem encouraging.

Riding the Wave: A Look at Global Dairy Prices 

Let’s discuss global dairy pricing. There has been a considerable increase over the previous several months. Skim milk powder, for example, reached its highest price since February 2023 at last week’s sale. Whole milk powder prices rose dramatically, reaching more than $3,400/MT in two of the previous three Global Dairy Trade events. That is the highest level seen since December 2022.

So, what exactly does this imply for New Zealand? Kiwi dairy prices are somewhat lower than worldwide norms but benefit from the global price spike. This tendency might be beneficial for New Zealand’s growers. Despite increased output, global supply remains limited. If this trend continues, prices might rise even more, increasing earnings for New Zealand’s dairy producers.

Milking Prosperity: Dairy’s Crucial Role in New Zealand’s Economy 

Dairy is a significant contributor to New Zealand’s economy. Have you ever considered how important this industry is? Let’s go into some numbers. The dairy business employs more than 40,000 people and indirectly supports 50,000 jobs. Dairy production employs roughly 5% of the country’s workforce.

The industry’s contribution to GDP is similarly substantial. In 2023, the dairy industry contributed roughly NZD 18 billion to New Zealand’s GDP or almost 6% of total economic production. The economic impact is even more significant when you include the ripple effect on allied businesses like feed, equipment, and transportation.

Exports are where the dairy business thrives. Dairy products account for around 28% of New Zealand’s total exports, bringing in more than NZD 20 billion yearly. Dairy accounts for over one-third of New Zealand’s total export revenue. It is not an exaggeration to argue that dairy’s success feeds the whole economy.

Would New Zealand be the same without its thriving dairy industry? Certainly not. The industry’s high productivity and considerable export value are critical to ensuring economic stability and expansion. With global dairy demand increasing, the success of New Zealand’s dairy farmers is inextricably linked to the country’s economic fortunes.

The Bottom Line

The dairy sector in New Zealand is celebrating several remarkable successes. The near future is positive, with milk output and solids much higher than the previous season, and the excellent North Island weather is facilitating this expansion. Fonterra has sweetened the deal with record rewards and a strong projection for the next season, indicating a positive outlook. Rising global dairy prices also help Kiwi farmers, indicating even higher profits.

The excitement around New Zealand’s dairy industry is undeniable. But, with global industries constantly altering, one has to wonder: Can New Zealand maintain its rising pace in the face of global uncertainties?

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Say Good-Bye to Supply Management

· Comments (3)
Friday, January 24th, 2014

For years the topic of Supply Management has been a hot button issue for dairy producers around the world.  Those who operate under a supply management system, such as the one in Canada, are strong advocates for the program.  While those that do not, such as New Zealand, Australia, and the US, tend to look at it with envy and even disdain. Recently there has been a lot of international talk about supplying of the supply management in the dairy sector.  The EU is removing supply management and the US government, who was  proposing a supply management system,   removed it in their most recent farm bill (Read more:  Dairy Farmers from Across the Nation Oppose Supply Management and  Compromise Reached: Supply Management OUT of Dairy Policy in Farm Bill).  With world trade becoming a greater and greater reality for all countries, it is only a matter of time before supply management, as we know it, no longer exists.

With that in mind we decided to take a look at the Canadian Supply Management System and the resulting impact, if it were removed.  Canada’s Milk Supply Management System was created to solve milk surpluses and low returns to farmers.  Understanding how this policy originally came into practice helps explain its longevity.  And understanding how the system works in practice points to the pressures it faces today.  These include astronomical quota costs, unanticipated dairy imports and globally uncompetitive pricing.  The system has had to evolve to address a range of domestic and trade changes.  The current milk supply management operates under three “pillars”: production controls (quota), administered pricing, and import controls.  As conditions have changed, regulations under supply management have changed.  It has been broadly successful in doing so, but its complexity has created operating costs and burdens for government and the dairy industry. Furthermore, with a more global economy, it has recently become a stumbling block in Canadian government world trade talks.  (Read more: Are We Playing Hide and Seek With Supply Management? and  Why the Future of the North American Dairy Industry Depends on Supply And Demand).

What’s the Story around the World?

Comparing Canada to the rest of the world, we find that New Zealand and Australia are at the highly market-oriented end of the continuum.  Canada is at the highly protectionist end. The U.S. and Netherlands/EU are in between.

Canadian milk production has been essentially constant since the mid-1970s and is actually down compared with the early 1960s.  At the same time, milk production in the U.S. has increased steadily.  In Australia, it has increased markedly following policy changes, prior to recent years when widespread drought limited production.  Netherlands dairy production increased steadily before quota controls were imposed in the 1980s and it has been relatively steady since, with a recent increasing trend.  New Zealand’s milk production is significantly up.

And what about milk pricing?  The national patterns diverge to a degree.  The available data suggests that prior to the mid-1980s, milk prices in the countries considered here broadly increased.  Canadian milk prices have continued to increase since the 1980s.  In the U.S. prices abandoned their trend of increases in the 1980s and have since become more volatile, consistent with the reduction in support pricing.  Similarly, in the Netherlands, the increasing price trend ended in the late 1980s.  Milk prices in Australia increased through the 1980s and plateaued in the 1990s. However, with the recent super market price wars, the price for milk in Australia has been extremely volatile.  New Zealand has seen a trend of higher prices and increased volatility, with some similarity to Australia.

Say Good- Bye to Supply Management - figure 1

Figure 1 presents divergences in milk pricing, using the U.S. as a reference.  The chart plots monthly P5 Eastern Milk Pool27 (Canada) blend milk prices versus U.S. Federal Order blend prices for New York/New Jersey and for the Upper Midwest since 1997.  Milk prices in Canada are generally much higher than those in the U.S. Over that period, the eastern Canadian price averaged $C63.05/hl, while the U.S. Midwest price averaged $C39.42/hl and New York/New Jersey averaged $C44.31/hl.  Moreover, because U.S. milk prices are much more volatile than those in Canada, the price differential is commonly wider than these averages suggest.  For example, the price spread between eastern Canada and the Upper Midwest U.S. has frequently exceeded $C40/hl— more than the average value of the Upper Midwest price itself. (Read more: Canada’s Supply-Managed Dairy Policy: How Do We Compare?)

The key advantage that Canadian producers have enjoyed over its peer countries is that fluid milk markets are characterized by seasonality that creates surpluses, which are diverted to industrial milk markets and thus result in lower industrial milk prices.  Sudden losses of export markets exacerbate domestic surpluses and depress milk prices.  Under persistent surpluses, with their associated inequities and low returns to farmers, the initial response is to mitigate adjustment through 27 The P5 Eastern Milk Pool is an interprovincial pooling agreement among Canada’s eastern provinces (Ontario, Quebec, Nova Scotia, New Brunswick, and Prince Edward Island) mandated pooling systems and more interventionist policies, such as price supports, product surplus removal programs, and production quotas.  These are eventually reduced or eliminated due to their cost burden.  The industry then adjusts, resulting in market growth.  Canada has not experienced the same pressures to reduce or eliminate interventionist policy that its peer countries have, so Canada continues to use certain approaches that its peers have dropped.  Nevertheless, industry adjustment has occurred in Canada, but without the market growth seen elsewhere.

Therefore, while Canada has not seen the growth that other world markets have, it also has not seen the extreme volatility that those other markets experience.  This stability is very much appreciated by Canadian milk producers, despite the high cost of entry and production (Quota, and Quota financing costs).

The World is Changing!

After 30 years in a supply management system the UK has now abandoned it.  Moreover, the EU as a whole is pushing for other countries to remove supply management as well.  (Read more: Canada May Drop Cheese Tariffs to Access EU Beef Market and Canada’s dairy farmers ‘angered and disappointed’ by EU trade deal that would double cheese imports).  This is causing great pressure for Canada to follow suit.  As the Canadian government seeks to open trade for all industries, especially Oil, Lumber and Beef, that access often comes at a cost. In Canada’s case that cost is opening up the Canadian dairy market.  More competition will mean that Canada’s high milk costs will have to go down thus decreasing the net return to producers.  While I don’t foresee the abolishment of the quota system immediately, it will happen.  As Canada opens up its markets to the world, that means that the Canadian government will have to further subsidize the milk price or allow the milk price to drop.  As the Canadian government is already running tight on its fiscal position, they are not likely to subsidize this system for very long.

While no one is arguing the benefits that supply management has had for the Canadian dairy farmer, that protection has come at a cost.  One of the greatest costs that I don’t think many realize is that it has allowed many producers to become complacent about their operations.  They have not been forced to be as efficient as possible.  Those that have been the most complacent are the ones who are going to feel the greatest hurt as Canada continues to open up access to world markets.  For those Canadian dairy farmers who think that the Canadian government will protect them till the end….what about the beef farmers, lumber and oil industry?  How can the Canadian government afford to protect and grow the market for all of them?  Everything has a price. (Read more: Save Frank & Marjorie Meyers Farm – The Army Is At The Gate & This Farmers Number Is Up!)

As a clarification point, while supply management as we know it is threatened, there is no question that the Canadian government is committed to a strong domestic agricultural industry.  Many other countries, including the European Union and the United States enact policies that subsidize (directly or indirectly) domestic production. This is something Canada does not currently do.  As the world market evolves, the Canadian system may have to move toward global markets and away from supply management.  It is also important to note that Canada gives more access to imported products than many other countries give in any single sector. Canada currently imports over 6% of the market for dairy products and more than 7.5% for poultry.  In contrast, the United States gives only 2.75% access to their market for dairy products and Europe offers a mere 0.5% for poultry. These will all be areas that will be addressed as world trade evolves.

The Bullvine Bottom Line

The world is rapidly moving to a free market economy.  This highly market oriented system will mean that those producers who can produce milk the most cost effectively will excel and those that are not efficient will perish.  Canada and its quota system that has done an amazing job at protecting its producers are most likely to be the hardest hit by these global forces.  Producers that are looking to the next generation need to seriously evaluate their operations and become as efficient as possible as fast as possible.  The message is clear.  Canada will be saying goodbye to the current supply management system.

 

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