Market News

Fonterra cuts milk production forecast

The worsening drought in New Zealand prompted dairy giant Fonterra to reduce its milk volume forecast for the 2014-15 year by 3.3 percent. Fonterra says total milk volume for the co-op this season will be 1.53 billion kilograms of milk solids, 3.3 percent below the record 1.58 billion last year. (3.36 billion pounds this season compared to 3.47 billion pounds last season)  The previous forecast called for production similar to the record output last season.

Milk production had been running above year-ago levels for the first-half of the season but Fonterra’s Group Director Cooperative Affairs Miles Hurrell says “the situation has changed significantly over the course of this month.” Drought has set in, pasture conditions have declined, farmers are drying cows off early “and there appears to be a reduction in feed supplements as the economics do not support their widespread use.”  Hurrell says milk production is now running 6.1 percent below year-ago levels.

Fonterra, the largest dairy exporter in the world says it will meet all current sales commitments but plans to reduce the amount of product offered on the Global Dairy Trade platform and other direct sales channels. The next GDT sale is Tuesday.

U.S. dairy futures shot-up the 75-cent daily limit on March through July Class III contracts on Thursday.