New Zealand drought threat in global dairy markets

Dairy product prices increased 3.6% in Tuesday’s GlobalDairyTrade auction, led by gains in butter and butter milk powder.

Reduced supply could further ease pressure on global dairy product markets, as drought, low milk prices, and high cull cow prices are predicted to reduce 2015 milk output more than expected, in New Zealand and Australia.

IrrigationNZ has warned water restrictions for farmers are following a similar pattern to 2012-13, when drought conditions wiped more than $1bn dollars from the dairy-dominated New Zealand economy.

IrrigationNZ, which represents more than 3,600 farmers who depend on irrigation, said restrictions are now widespread throughout New Zealand. In the North Island, Manawatu’s second driest year in more than 85 years threatens milk production from 215,000 cows (about 6% of New Zealand’s cows). Parts of Otago, which has 144,750 cows, got only one third of expected rainfall since August.

Farmers have been shedding stock since before Christmas in South Canterbury, a region which has New Zealand’s largest dairy herds, but only 2% of the total cows.