For the fourth time in the current milk season, Fonterra Cooperative leaders raised milk prices for its dairy farmers. Of course that milk season began in August as it does each year when New Zealand dairy producers reap the benefits of new spring grasses for grazing their dairy herds in the southern hemisphere.

As it stands now, New Zealand dairy farmers will receive $6.15 per kilogram of milk solids. That pay price may sound like a foreign language to North American dairy producers. When converted, that milk price will be close to a $15.20 All-Milk price on a per hundredweight basis. The University of Wisconsin’s Mark Stephenson confirmed our math. That price climbed roughly $4.72 per hundredweight over the past year.

That $6.15 pay price will be substantially higher than the opening projections by Fonterra, which collects roughly 95 percent of the milk in New Zealand. Here were the original pay forecasts:

  • $4.25 per kilogram of milk solids ($10.48 per hundredweight) on May 26, 2016
  • $4.75 per kilogram of milk solids ($11.72 per hundredweight) on August 26, 2016
  • $5.25 per kilogram of milk solids ($12.95 per hundredweight) on September 21, 2016
  • $6 per kilogram of milk solids ($14.80 per hundredweight) on November 18, 2016
  • $6.15 per kilogram of milk solids ($15.20 per hundredweight) on May 25, 2016

Why does New Zealand pay on price per kilogram of milk solids?

That’s because the island nation is by far the world’s largest dairy exporter dwarfing second place U.S. by exporting over 90 percent of its production. That’s because New Zealand has nearly 6 million dairy cows and 4 million people. With that in mind, it’s the dairy solids that are far easier to export after extracting 87 percent of the water found in milk.

What does next year hold for Kiwi farmers?

It’s opening forecast for 2018 is $6.50 per kilogram of milk solids or $16 per hundredweight.

This price is a far cry from the 2015-2016 season when New Zealand dairy farmers hemorrhaged equity. During that season New Zealand dairy farmers received $3.90 per kilogram of milk solids.

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© Hoard's Dairyman Intel 2017
June 5, 2017

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