Market marked by volatility

March saw export dairy markets pared back after gains in January and February, Alex Winning reports.

Let’s start with the decline shall we?

New Zealand’s export figures have pulled back for the first time this year with a decline for March.

Total dairy export volumes declined 6% year-on-year in March, bringing the year-to-date (YTD) figure to a slight decline of 1%.

Unsurprising given where commodities sit compared to this time last year. Total dairy export values have also declined, down 9% year-on-year (YoY). Despite this, gains made in January and February have total dairy export values at net zero change year-to-date. Whole milk powder (WMP) exports declined 8% YoY bringing the YTD figure to a 12% deficit. This figure was driven by declines headed to Southeast Asia, China, and the Middle East, reporting 27%, 31%, and 8% declines YoY.

Skim milk powder (SMP) exports declined 2% however, with stronger exports earlier in the year, particularly headed for China, SMP exports are still up 37% YTD.

The decline saw mixed results out of Asia with a slight increase in Southeast Asian purchases which were offset by a slight decline for SMP headed to China. Despite this, as noted, both regions are up YTD, with Southeast Asia and China up 25% and 99% YTD respectively.

Anhydrous milkfat (AMF) exports increased 19% YoY, bringing the YTD deficit to a slight 2% decline. China, Europe, the Middle East and the United States drove this increase with figures across the board. On the other hand, butter exports declined 8%. Australian purchases increased 115%; however, Southeast Asia, China, and the Middle East reported declines enough to offset Australia’s increases. Cheese was unchanged despite increases from China and Australia. On the other hand, whey declined 13% YoY, driven by declines headed for the US.

Infant formula continues to pump, up 48% YoY with Chinese infant formula purchasing driving the market currently.

Now to the less-positive news.

NZ’s milk production has increased in the wet end to the summer months, with another gain in March, making it the fourth consecutive month of gains this season, data from the Dairy Companies Association of New Zealand (DCANZ) shows. Milk production was up 1% on a milksolids basis YoY, and 0.3% higher on a tonnage basis, year on year. Season to date, milk production is down 0.9% on a kg MS basis and down 1.4% on a tonnage basis. Pasture growth conditions have been better than the last couple of seasons over the past few months.

The NZX Pasture Growth Index shows conditions have been near the top end of historical averages through much of March and April, which should support milk production through the last couple of months of the season.

Conditions are starting to ease a little now as we head into colder weather, which will likely impact milk production in late May.

The NZX forecast is for NZ milk production to be down 0.7% for the full 2022-23 season.