Farmers trim milk volumes

Fonterra is projecting farmers will produce at least 2-3 per cent less milk this season, although further cutbacks and an expected El Nino could see even lower volumes.

Its milk volume forecast for the 2015-16 season remains at 1589 million kilograms of milk solids, a figure it set earlier in the season.

Fonterra is required under the Dairy Industry Restructuring Act to update its current season forecast milk volumes by early September.

ANZ economist Con Williams picked the drop could be in the region of ‘‘5 plus per cent’’ because of the changes farmers had made to contend with lower prices.

"Fonterra is flagging that they will probably revise the figure down as we move through the season, and then there’s the question of how El Nino will impact," Williams said.

According to the Agri HQ price calculator, these factors plus futures pricing have lifted the expected final Fonterra payout to $4.19 per kg/ms. At present it is a forecast $3.85.

Williams predicted a slightly lower payout price, on the assumption the value of the New Zealand dollar increased.

Waikato Federated Farmers president and dairy vice chairman Chris Lewis expected a larger drop in production this season.

‘‘The feeling I have got when talking with my network is that there will be a 5-10 per cent cutback in production."

Fonterra group director cooperative affairs Miles Hurrell said although Fonterra had forecast a 2-3 per cent decline in volumes there was evidence that farmers were pulling back on production, which could lead to a further downward revision of forecast volumes as we move through the season.