Milk production up 4% in regions

Milk production in Otago-Southland is up 4% for the season to the end of February, compared with the previous corresponding period, and up 6% nationally.

Production across the country was ''looking great'' for most areas, with Bay of Plenty up 9% on the drought-reduced performance of 2012-13, while Canterbury was up 7% on last year.

However, some of that extra milk was because more cows were being milked, DairyNZ chief executive Tim Mackle said.

Last week, Fonterra bumped up its forecast farm-gate milk price to a record $8.65 per kg of milk solids, meaning a forecast cash payout to farmers of $8.75 for the 2013-14 season.

The increase would give a much-needed boost to confidence in rural communities, particularly for areas experiencing drought-like conditions, Dr Mackle said.

The extremely dry conditions were patchy, Waikato, the west coast of Northland, Gisborne, Wanganui-Rangitikei, Wairarapa, Marlborough, Hurunui, South Canterbury and Central Otago being worst affected, he said.

Dry conditions were particularly severe in parts of Waikato - home to New Zealand's greatest concentration of dairy herds - where pastures had browned off, pasture covers were very low and farmers were having to buy additional supplementary feed to be able to continue milking.

''But generally the story is still one of a bumper season with production for the entire country across all milk companies up 6% on last year.

''All we need now is some rain in those dry areas to make it a truly record season for most of our dairy regions,'' he said.

In BNZ's latest rural report, the bank's economists said Fonterra's milk price forecast might nudge higher yet.

They expected global dairy prices to trend lower over the coming 12 to 24 months as global milk supply responded to the previous persistent price strength and European production quotas were removed.

That could well see the payout back below $7 within two years.

The ANZ commodity price index posted a third successive increase last month, rising 0.9%.

Cheese and butter prices led the increases, lifting 7% and 6% respectively.

The increase in cheese prices pushed the series to a six-year high, butter prices reaching a two-and-a-half-year high.

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