New Zealand milk prices fell by 3% in the four-week period ending 28th October 2020, amid an uptick in milk production.

New Zealand milk production increased by 1.8% year-on-year (y-o-y) in September 2020, while season-to-date production was up by 2.9% y-o-y. As a major dairy exporter, New Zealand’s performance is seen as a strong influencer of global dairy prices.

Milk production in New Zealand for 2020-21 season (June-May) is expected to grow by 1.5% y-o-y, which is lower than originally forecast (+2% y-o-y). This reduction is due to adverse effects of weather on pasture growth conditions in recent weeks.

October production levels have shown further increase, a result of good pasture growth conditions seen throughout September. However, October experienced dry weather conditions which are expected to continue. As such, while milk supplies increased, dry soil conditions are likely to impact production growth in the coming months.

These conditions are also expected to add further upward pressure to feed costs. The price of palm kernel has recently increased, and any additional demand resulting from poor pasture conditions is likely to drive up the price further, thus raising milk prices for the remainder of 2020.