Fonterra Milk Supply Tumbles on Worst N.Z. Drought in 30 Years

Milk supplies in New Zealand, the biggest dairy exporter, dropped for a second month in March as the country’s most widespread drought in at least three decades curbed production and boosted prices to a record, according to Fonterra Cooperative Group Ltd. (FCG)

Milk collection slumped 16.3 percent last month from a year earlier and declined 2.3 percent in February, Auckland-based Fonterra, the world’s largest dairy shipper, said in a statement today, without providing details. Collections were 2.8 percent ahead of a year earlier in the 10 months to March 31 at 1.3 million kilograms of milk solids, it said.

A drought across the entire North Island may cost NZ$2 billion ($1.7 billion) as the conditions threaten economic growth, the government estimates. Fonterra said last month that growth in milk volumes may be unchanged this year as drought curbs output. New Zealand may receive near-normal rainfall through June, after March rain was about 20 percent of normal in some parts of the North Island, according to the National Institute of Water and Atmospheric Research.

Rain has now been received in most regions over the past two weeks but is largely either too little, too late, or both to impact the current milk flows,” Rabobank International said in an e-mailed report today. “It will be welcomed to allow some action to renew pastures.”

Whole-milk powder surged 92 percent this year to a record $5,998 a metric ton on April 2, according to Fonterra. Class-III milk futures have surged 6.4 percent on the Chicago Mercantile Exchange this month on expectations that buyers will seek to import more from the U.S. as output in New Zealand slows.

Wholesale demand for milk powder could eventually fall off if “prices remain at this level or possibly even higher for a longer period of time,” Fonterra Chief Executive Officer Theo Spierings said March 27, adding that there were no signs of that happening yet.

To contact the reporter on this story: Phoebe Sedgman in Wellington at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.