Milk production in New Zealand and Australia is down at the start of the new season, according to a Rabobank report. A largely absent Chinese buyer is still evident in global markets.

According to Rabobank senior analyst, Michael Harvey, there has been plenty of attention on New Zealand’s milk supply as the seasonal peak approaches. “Weather risk was always lurking in the background,” he says. “And some of the risk has started to materialise.”

Milk production in New Zealand for August 2022 was down 4.9% on a milk solids basis. This means that New Zealand milk production season-to-date is down 4.4% (4.2% on a milk solids basis). Rabobank expects milk production for the full season to be negative. “In contrast, US milk production posted its strongest gain in 15 months in August, and US milk supply is showing some positive signs,” Harvey points out. Despite a strong footing, Australian milk supply started the 2022-2023 season on a weak note. National milk supply fell 4% last season, and is down more than 8% in the start of the current season on a volume base. Rabobank still expects milk supply to stabilise as the season progresses on the back of an ample supply of feed, irrigation water and healthy farmgate margins. The Rabobank analyst emphasises that a largely absent Chinese buyer is still evident in global markets. The August data showed a sixth consecutive year-on-year total volume decline. Rabobank has been forecasting lower imports in 2022, which will likely carry into 2023“It is not surprising to see China’s import volumes trending lower,” Harvey says. “Buoyant local supply, ample inventories and softness in consumer demand are feeding through into reduced import purchasing. A close eye will remain on the China dairy market for future price direction.” Rabobank says that other importers are taking advantage of lower prices and less Chinese purchasing activity. “This has helped stabilise Oceania commodity prices in September, after a sizeable drift in prices since March. Across the dairy complex there was a small increase in spot prices for Oceania-origin products.” Rabobank does not rule out further weakness in prices to come, and says that local exporters will welcome the recent price stability.