Home' NZ Dairy Farmer : July 2011 Contents 42 The Dairyman JULY 2011
However, the dry Spring will limit the availability and quality of
pasture and silage through Q3, and increase the dependency on pur-
chased feed ? squeezing margins and reducing yields. As foreshad-
owed, 1 June the European Commission put up just over 90,000
tonnes of SMP intervention stocks for sale to EU traders for export
under the Most Deprived Persons programme.
The majority of the
powder is reported to
have already been com-
mitted to export cus-
tomers. The product is
old and as such will be
used mainly for animal
feed or blended with
fresh product, limiting
its impact on market
pricing. Commercial stocks are low for this time of year. Domestic
sales are expected to slowly expand in coming months, as employ-
ment and incomes continue to build.
On-farm profitability tightened again in the US in May as milk
prices eased marginally and feed costs pushed up to a new record ?
leaving income over feed costs at just USD 8.25/cwt. Supply growth
fell to 1.5% due to declining margins and cold weather through
April. Local demand conditions are improving in the form of income
growth and job creation.
However, significant headwinds remain, in the form of rising fuel,
food and dairy prices. Against this backdrop, domestic dairy sales
were up 2% in Q1 on a milk equivalent basis. However, growth is
lopsided, with food-service cheese the dominant growth source.
Rabobank expects milk supply growth to slow to 1.3%, YOY,
through Q3. Margins will remain skinny with some easing in feed
costs likely matched by a small decline in milk price. Bank lines are
also tight, equity is being rebuilt, there is declining spare capacity on
farm, and the margin for cull cows over replacements looks attrac-
Consumption will continue to modestly improve as the slow
growth in employment and incomes maintains marginal dominance
over rising dairy prices and high fuel costs. And with some recent
local supply-side disruptions to cheese manufacture, the US net
exportable surplus is expected to fall through Q3, bringing a modest
decline in YOY exports.
Farmgate milk prices reached an estimated NZD 7.50/kg MS for
the 2010/11 season: the second highest price ever. Ideal climatic con-
ditions in most dairy regions through the Southern Hemisphere
autumn enabled farmers to respond to attractive margins.
Milk production in the January to June period is expected to come
in some 15% up, YOY. Most of the additional milk flow has contin-
ued to be pushed into WMP production for China. Buoyant markets
have encouraged Fonterra to forecast a milk price of NZD 6.75/kg
MS for the 2011/12 season.
This will be profitable for most farmers, unless seasonal condi-
tions turn sour, and highly profitable for those carrying little debt.
Rabobank expects the 2011/12 New Zealand season to be strong.
Feed availability and cow condition are good, margins attractive,
and some new farm conversions will come online. However, the use
of improved returns by many to retire high debt levels rather than just
expand is expected to keep growth to around 4% through 2 H 2011.
Moreover, it's important to remember the NZ milk production season
doesn't really get going until September, and is highly weather-
dependent. As such, the impact of the new season on Q3 pricing will
be psychological rather than fundamental. New Zealand export ship-
ments will be up on prior-year levels through Q3, but at seasonal
lows, with brisk sales ensuring little uncommitted product and low
inventories at present.
Figure 2: Milk Production Growth in Key Export Regions
Last 3 months
31% for 3 months to May 2011
3.3% (to Apr)
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IN YOUR AREA VISIT www.nzmpta.co.nz
OR PHONE 027 449 7402
Is your milking machine performing at maximum capacity and
minimising risks for your herd and your milk quality?
Incorrect vacuum levels, pulsation rates and ratios will cause animal
health issues and result in profit loss.
Now is the time to have your milking machine function tested and the
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• audited every two years by an independent body
IT'S TIME TO GET YOUR
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4 Ranfurly St - Otorohanga
ph: 07 873 8900
In shed systems /silos available
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