Fonterra's NZ milk collection lifts slightly in October as weather improves

Fonterra Cooperative Group's domestic milk collection lifted slightly in October as weather conditions improved toward the latter half of the month.

Auckland-based Fonterra collected 208.8 million kilograms of milk solids in October, up 2.3 percent on the same month a year earlier, while the year-to-date collection increased 0.3 percent to 502.4 million kgMS. Widespread wet weather for most of spring hit volumes in the current season but turned around in late October, Fonterra said. Daily collections peaked at 82 million litres on Oct. 26, 1 percent higher than the prior season's peak.

In a note earlier this week, ASB Bank senior rural economist Nathan Penny said the expected rebound in production in October on the improving weather is "likely to cap any potential underlying improvement in dairy commodity prices." Still, given the season has peaked prices could still drift higher in the short term as production volumes fall over the remainder of the season, he said.

Tonight's GlobalDairyTrade auction comes after three consecutive declines in dairy product prices and the futures are currently pointing to a slight rise in whole milk powder.

Fonterra said its Australian milk collection rose 31 percent to 18.4 million kgMS in October and season to date collection lifted 26 percent to 53 million kgMS. Fonterra attracted new farmer suppliers across the Tasman from rival Murray Goulburn after Australia's biggest dairy cooperative was wrong-footed by a slump in global prices, and as growth has been supported by strong seasonal conditions across all regions.

Regarding rival markets, Fonterra said European milk production lifted 5 percent in September, led by Germany and France. "September showed the largest growth since early 2016 as production ramps up on the back of increased demand," it said. European production for the 12 months to September was flat. In the US, it said production lifted 1 percent in September and is up 2 percent in the 12 months to September.

Regarding its main markets, Fonterra said imports continue to be "very strong" in China, with almost all categories showing growth in the 12 months to September. According to Fonterra, dairy imports into China were up 12 percent or 263,000 tonnes compared to the same period a year earlier.

Units in the Fonterra Shareholders Fund, which gives investors exposure to Fonterra's earnings stream, rose 0.2 percent to $6.30 having gained 4.8 percent so far this year.

(BusinessDesk)