South Island milk production lifts

Booming South Island milk production will prop up Fonterra's national collection this year as the North Island wilts from lack of rain in the season's home straight.

The giant global dairy exporter, which collects 92 per cent of the country's milk and earns 25 per cent of New Zealand's export returns, said with the end of the 2009-10 season approaching, South Island milk production was 9 per cent up on last season, while the North Island was 1 per cent behind.

Overall, Fonterra suppliers' national milk production is currently around 2 per cent ahead of last year's 1.3 billion litres, said Fonterra general manager, milk supply, Tim Deane.

But for some North Island dairy farmers hoping to use Fonterra's projected $6-plus/kg milksolids payout this season to recover from previous drought and last year's recession-squeezed payout, that overall 1 per cent North Island dip skates over some ugly figures.

In Northland, production is 15 per cent down on last season, which was also a poor production occasion, Mr Deane said. The situation was "fairly dire" after a very dry summer and bad spring weather.

"It's been even worse than last year and last year wasn't good." Compared to last year's milk production, Northland dairy farmers stand to lose around $18 million in potential payout this season, Mr Deane said.

But if last year had been a "normal" season, the evaporation of milk production this season would have meant a loss of more than $30 million in potential payout, he said.

In Fonterra's biggest milk catchment area, Taupo to south Auckland including Waikato, milk production is falling away because of lack of rain and is currently half a per cent behind the same time last year.

But the lag was expected to increase as pastures dried, Mr Deane said.

In contrast, South Island production had boomed as land use conversions in Canterbury and Southland kicked into serious production, and new conversions started milking.

Fonterra is forecasting a payout of $6.05/kg milksolids for this season, though commodity market analysts believe it has 30c/kg more in the pot thanks to improving international commodity prices.

The company now claiming to be New Zealand's second-biggest milk processor, privately-owned Open Country Dairy, did not return calls about its milk supplies from farmers this season.

Westland Milk Products milk production is 3 per cent ahead of last year's 44 million/kg milksolids, said chief executive Rod Quin .

The increase was a result of recently settled weather after a mixed weather season and accepting 1 per cent extra milk over last year from South Island private company processors Synlait and "other Canterbury processors", he said.

Westland is forecasting a 2009-10 payout of between $6 and $6.30/kg milksolids. Last year it paid out $4.50/kg. Fonterra paid $5.20/kg.

- © Fairfax NZ News