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New Zealand 22.12.2023

New Zealand Dairy Outlook 2024: Challenges Loom

Source: The DairyNews
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Projections for 2024: New Zealand's milk production is anticipated to see a marginal decline, reaching 21.2 million tons, presenting a complex landscape for dairy farmers grappling with multiple challenges.
New Zealand Dairy Outlook 2024: Challenges Loom
Weather Patterns and Pasture Growth: El Niño weather patterns and an impending forecast of dry conditions during the critical summer months pose significant challenges to New Zealand's pastoral-based production system. The National Institute of Water and Atmospheric Research warns of potential hampered pasture growth, especially in the North Island, which encompasses a substantial 57 percent of the dairy herd.

Farmgate Milk Prices and Inflation: Adding to the concerns are reduced farmgate milk prices, exemplified by Fonterra's 27-percent decrease in the mid-point payment for milk solids to NZ$6.75. This drop is exacerbated by the highest on-farm inflation in four decades, impacting various inputs such as energy, feed, and labor.

Financial Strain: The strain on dairy farmers is further amplified by rising interest rates on farm debt, triggered by significant hikes from the New Zealand Reserve Bank (RBNZ). Over the past 12 months, the official cash rate has doubled, affecting 80 percent of floating farming term liabilities subject to re-indexing every six months. While the RBNZ has declared a pause in rates, historical trends suggest a 12-month lag in economic responses to central bank rate changes, indicating continued repercussions throughout 2024.

Navigating Uncertainty: With a convergence of weather-related challenges, pricing pressures, and financial strains, New Zealand dairy farmers find themselves navigating a complex landscape in 2024, seeking resilience and adaptive strategies to secure sustainable production.

Source: Insights from USDA World Markets and Trade Report
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