'Sudden slowdown': Warm temperatures see dairy production levels dive

Despite the slow down, Nathan Penny said farms are still on track for a good season .
Despite the slow down, Nathan Penny said farms are still on track for a good season . Photo credit: Newshub

Hot weather earlier in the year is being blamed for a marked drop in dairy production during March, compared with the same period last year. 

Milk solids production fell 7.5 percent from a year ago, taking it to the lowest level of March production in six years, according to a new ASB commodities report.

ASB senior rural economist Nathan Penny said it was a dramatic change from just two months ago in February, when production was up 7.7 percent on 12 months prior.

"With strong growth in previous months, we are still on track for a good season - though a weaker one than previously expected," he said.

He said it's meant a rethink of production expectations.

"We had thought that production growth would hit 3 percent in the 12 months to May, but given the sudden slowdown, risks have grown that production could undershoot that," said Penny.

Production is also slowing in other jurisdictions, supporting global milk prices.

The US dairy herd shrunk for the ninth consecutive month in March, implying lower American production even as output per cow rises. 

Falling production and robust demand (particularly in China) signal prices moving in one direction: up. 

"All-in-all, we are comfortable with our $6.60/kg milk price forecast for this season and see upside risks to next season's $7/kg forecast." 

He said with the 2019/20 season not yet underway, unexpected movements could happen. 

"Accordingly, our prediction comes with a large margin of error, and we will be watching production numbers in the coming months for signals on the supply-side drivers of the milk price."