The ongoing dry weather conditions in New Zealand have led to water usage restrictions being imposed on some dairy farmers in the south island.
According to DairyCo these restrictions could become more severe and may extend to the more concentrated dairying regions in the north island if the current dry weather continues.
DairyCo says at the end of November, New Zealand’s national weather institute (NIWA) increased the likelihood of dry spells caused by an El Nino type weather event occurring over the next three months to 75%, up from 66% the previous month. .
New Zealand farmers milk production is currently running 9% higher than last year on a rolling average basis. However, analysts in New Zealand predict that an extended period of dry weather could limit the growth in milk production to 2% in the 2014/15 season.
According to DairyCo the current downward pressure on global commodity prices, which is impacting on farmgate prices, is being driven by global supply of dairy products exceeding demand.
It says with New Zealand being one of the world’s largest exporters of dairy products, accounting for around 60% and 20% of global exports of butter and SMP respectively, any restriction in farmers supply in New Zealand could help to stabilise global prices.
Fonterra's most recent auction held this week showed a 2.4% increase in the overall auction index.
Butter, WMP (Whole Milk Powder), AMF (Anhydrous Milk Fat) and Casein showed an increase in price index compared to the previous auction. In contrast, the price index for SMP (Skimmed Milk Powder), Cheddar and BMP (Butter Milk Powder) declined.