Dry spell shadow over payout

The tantalising prospect of a $6-plus Fonterra milk payout this year is taking a dry weather battering in the dairying powerhouse north of Taupo as milk production slides.

And a new forecast from the National Institute of Water and Atmospheric Research offers no relief, suggesting below normal rainfall for the next three months in important dairying areas such as Waikato.

At least 50 per cent of Fonterra's national milk supply – estimated to be 16 billion litres this season – comes from farms north of Taupo, including its key milk catchment of Waikato. Waikato milk collection is down 2 per cent on this time last year and Northland down 5 per cent, said Fonterra general manager commercial, trade and operations Jason Minkhorst.

Waikato pastures, which produce most of the 50 per cent, are still recovering from a severe drought in 2007-08, estimated to have cost its farmers $600 million.

Before Niwa's forecast yesterday, Mr Minkhorst estimated North Island milk production would be down around 2 per cent on last year. However, a good season in the South Island is expected to take up the slack, he said.

Waikato farmers do not have as much supplementary feed in store as they did last year, but at the current rate were likely to be forced to start feeding cows 20 days earlier than last year, said consultant Ken Bartlett of advisory agency Farmwise.

"If it doesn't rain a bit in the next 10 days it's going to look a bit bloody ugly."

Fonterra, which processes around 92 per cent of the country's raw milk, is forecasting a bumper $6.05 per kilogram of milksolids payout this season thanks to improving commodity prices, and analysts have speculated that another 30c/kg could still be in the pot.

Mr Bartlett said farmers he had this week advised to start their dry threat management systems were in the Morrinsville area of Waikato, which is always slower to dry out than other parts of the district.

Niwa said rainfall, river flows and soil moisture for January, February and March were likely to be below normal in the north and east of both islands.

Mr Minkhorst said the other key North Island dairy catchment, Taranaki, was experiencing a "pretty normal" season.

"Overall Fonterra collection will be slightly down if not neutral [on last year] in terms of milkflows. The whole North Island looks to be down around 2 per cent and the South Island may be up around 3 per cent."

- © Fairfax NZ News