Fonterra tightens supply

Fonterra farmers will produce 4 per cent less milk this season than last after the co-operative announced it will be taking ‘‘volumes’’ of product off the GlobalDairyTrade (GDT) platform.

In a market announcement late on Friday, Fonterra said continued dry weather across the country had led it to revise its prediction.

It is the second revision the company has made in the past month. Only last week the dairy giant forecast New Zealand milk production would be at the same level at last season – 1525 million kg of milk solids (kgMS), compared to the new revised figure of 1480 million kgMS.

A Fonterra spokesman said a proportion of the products usually sold on GDT would be sold through its direct customer channels instead of at the January 3 auction.

He was not able to say how much product would be removed.

At the previous auction, on December 19, a total of 29,592 metric tonnes was sold.

The spokesman would not comment on whether the move meant prices for dairy exports would increase.

The Fonterra statement said the GlobalDairyTrade would be ‘‘carefully’’ managed for the rest of the season as a result of the milk shortage.

It said the effects of recent dry weather on soil moisture and pasture quality were expected to continue into the new year.

But even a forecast of rain in early 2018 would not be enough to bring production back to the previously anticipated levels.

Federated Farmers dairy sector chairman Chris Lewis said farmers had been caught out by the early start to the dry spell which meant plant yields had reduced and caused a decrease in feed for milking cattle.

‘‘It shouldn’t take anyone by surprise. If you don’t get water, there’s no grass and without that you don’t get milk.’’

He said Fonterra would not be alone in the forecast losses which would likely lead to higher demands on New Zealand’s milk supply.

However, Lewis said overseas production was building so the flow-on effect was unlikely to be dramatic.