El Nino here for rest of 2015, stoking New Zealand dairy fears

September 15th, 2015


Category: Dairy, Weather

Cow.Cows.Dairy.Milk.Farm450(Agrimoney) – The El Nino will not fade until next year, official meteorologists in Australia warned, even as real estate experts rated a continuation in the weather pattern a key fear for farmers in New Zealand, the top milk exporting country.

Australia’s official weather bureau, which two weeks ago rated the El Nino the strongest since 1997-98, on Tuesday gave its first detailed forecast of when the weather pattern might fade – putting its demise into 2016.

“El Niño continues to strengthen,” the Bureau of Meteorology said.

Evidence from factors such as trade winds and Pacific water temperatures “indicate the El Niño is unlikely to end before early 2016”.

Indeed, “all models suggest the event will peak around the end of the year [2015], followed by rapid weakening” heading into the southern hemisphere autumn – ie, early in 2016.

“It is too early to accurately determine the likely pattern beyond [southern hemisphere] autumn, but a continued El Niño is considered the least likely outcome at this stage,” the bureau added.

‘Causing nervousness’

The forecast came as the Real Estate Institute of New Zealand rated El Nino as a lingering worry for the country’s farmers, who were in other respects, including in milk prices, seeing some cause for optimism.

The institute reported “brighter spots” for New Zealand farming, for which dairy is by far the most important sector, including extra support from milk giant Fonterra, the “slight turnaround in prices” at GlobalDairyTrade auctions (of which the next event is later on Tuesday) and a cut in interest rates.

“Of concern, however, and causing nervousness throughout the northern and eastern regions of the country is the prediction of an El Nino over the [southern hemisphere] summer that would be most unwelcome,” said Brian Peacoke, the Reinz rural spokesman.

This concern was highlighted in Canterbury, in the eastern side of the country’s South Island.

‘Typically leading to drought’

El Ninos have a habit of bringing dryness to parts of the country which slow pasture growth, and therefore undermine milk output.

According to New Zealand’s National Institute of Water and Atmospheric Research, the country during El Nino periods “tends to experience stronger or more frequent winds from the west in summer, typically leading to drought in east coast areas and more rain in the west.”

New Zealand milk production is currently recovering from its winter low towards seasonal highs late in the calendar year, in spring and early summer.

‘Reduction in dairy cow numbers’

Reinz made its comments as it unveiled a sharp recovery in prices of dairy farms in New Zealand, which stood 17.3% higher in the June-to-August period than the average for the May-to-July period.

Prices in the May-to-July spell had slumped by 13%. (Prices often show some volatility over the winter, thanks to lower transaction volumes.)

August prices were down 6.8% year on year.

While noting a string of causes for some relief among farmers, which also included a “supportive stance” among banks and a “strong” beef market, Reinz also highlighted that “caution is the dominant factor within the rural sector, particularly in the dairy industry, where prudent operators are trimming costs wherever practicable.

“Reports indicate a reduction in dairy cow numbers, with heavy culling of poorer performing and/or temperamental cows and heifers.”

New Zealand dairy farmers face their worst milk payouts from processors such as Fonterra in more than a decade thanks to weak international, with prices well below the cost of production for most farms.

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