Rain slows decline in production

Fonterra is on track to grow milk production by about 1 per cent this season, with recent rain helping to slow the rapid decline in production in the upper North Island.

Tim Deane, Fonterra's general manager of shareholder milk supply, said supply was still dropping in the North Island but not as fast, thanks to the rain.

Production in the North Island has dropped by an average of 3 per cent, as dairy farmers dried off parts of their herds early, with Northland suffering the worst decline of 15 per cent.

Production in the wetter South Island, however, is up 9 per cent.

Pete Morgan, who farms near Te Awamutu, said his farm was tracking 5 per cent below the average until the recent rain.

Now it's likely to track 4 per cent below the average for the season.

"Growth is not going to happen for us this season," Mr Morgan said.

"In our part of the Waikato we were hit by a very dry October and November and a lot of us have had very low pasture cover.

"The recent rains are not going to generate a production glut."

Mr Morgan was not worried about last week's fall in whole milk powder prices reflected in Fonterra's latest online globalDairyTrade auction.

Whole milk powder prices dropped in the February auction by 1.6 per cent to US$3256 per tonne.

February's result followed a 7 per cent drop on December's average price which ended five consecutive rises which eventuated in a 95 per cent increase in whole milk powder prices and put the market closer to where it was in the pre-recession boom.

Fonterra chairman Sir Henry van der Heyden said the drop was down to the market reacting to new dairy seasons overseas.

"I don't think the performance in last week's auction has anything to do with climate conditions in New Zealand," Sir Henry said.

"Milk production is starting to ramp up in Europe and the United States as they come out of their winter and into their spring.

"There's going to be a lot more volume around."

- © Fairfax NZ News