Globally, milk production faces constraints – in Uruguay, for example, May production dropped -11.9% YoY.

By Cristina Alvarado, commercial manager, data and insight, at NZX

June marked the start of New Zealand’s new dairy season. In this edition, we’ll delve into the key aspects of the month and provide a comprehensive overview of the 2023-2024 season, comparing it to the prior season.

Agriculture is the backbone of NZ’s economy, with dairy being a significant contributor. According to the Ministry for Primary Industries’ 2024 Situation and Outlook for Primary Industries (SOPI), dairy exports accounted for over 44% of the country’s primary industry exports in the past 12 months, with an estimated export revenue of  $24.16 billion for the year ending 30 June 2024.

NZ’s milk production in May closed the season with 917,117 tonnes (96,364,000 kgMS) of milk collected, totalling 21.31 million tonnes and 1.88 billion kgMS for the full season. This represents a -0.7% decrease in tonnes but a 0.5% increase on a milksolids basis compared to the previous season (2022-2023).

The SGX-NZX Milk Price Futures and Options (MKP) traded a total of 54,334 lots (1 lot = 6,000kgMS). Therefore over 17% of NZ milk was managed through futures or options throughout the 2023-2024 season.

SGX-NZX dairy derivatives is a tool to manage price risk. When looking at milk price tools for farmers, the NZX Dairy Derivatives team is happy to support farmers wanting to understand these tools.

Globally, milk production faces constraints in regions like the United States, Argentina, and Uruguay, with year-on-year (YoY) declines in May production. The US reported a -1.0% decline, Argentina a -10.8% drop, and Uruguay a -11.9% decrease YoY in May. However, Europe and Australia reported growth, with Europe’s April production increasing by 1.5% and Australia’s May production rising by 3.5%.

Global Dairy Trade (GDT) auctions in June had mixed results, with a 1.7% increase in event 357 and a -0.5% drop in event 358. In July’s first event (359), the GDT price index declined by -6.9%, in line with the expected seasonality and the increased volumes offered in the event; setting the average price at $3,782.

NZ’s dairy exports increased by 4% in volume, with 2.86 million tonnes of dairy products exported between June 2023 and May 2024. Whole milk powder (WMP) accounted for 50.7% of exports (1.45 million tonnes), followed by skim milk powder (SMP) with 15.8% (453.79 thousand tonnes), cheese 13.0% (372.74 thousand tonnes), butter 9.3% (266.78 thousand tonnes), anhydrous milk fat (AMF) 7.5% (214.41 thousand tonnes), and whey 3.7% (105.14 thousand tonnes). There was a shift in the product mix exported compared to the previous season, with increases in WMP, SMP, AMF, and whey of 5.4%, 6.3%, 2.2%, and 25.1%, respectively, but decreases in butter (-4.5%) and cheese (-1.4%).

Trade in other key regions was mixed. The US reported a -4.1% YoY decrease in May exports, Australia a 22.3% YoY increase in May, Europe a 2.0% YoY increase in April exports, and Argentina a -0.5% YoY decrease in May. China’s total dairy import volumes decreased by -20.1% YoY in May.

The 2023-2024 season saw more growth in GDT prices than it did on the 2022-2023 dairy season. We also had steady milk production in New Zealand and witnessed constrained supply from other regions due to global events, especially with shipping constraints through the Suez Canal and the Panama Canal.

If global milk production and trade remain constrained, and demand continues to grow in emerging regions like southeast Asia and the Middle East, we can expect a balanced 2024-2025 season in NZ.

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