21 Mar 2013

Milk production predicted to fall

7:15 am on 21 March 2013

Some economists are predicting that the country's milk production could drop for the first time in five years because of the mounting impact of the North Island drought.

They say it will hit farmer incomes, because the loss of production will more than offset any gains from rising dairy prices.

Westpac agri-economist Nathan Penny says latest forecasts indicate milk production for the 2012-13 season may be as much as 2% lower than last year's total, despite increasing herd sizes and a bumper spring.

That's a rapid turnaround from January, when milk volumes were up 6% on the previous year, which in turn was 10% better than the 2010-11 season.

Mr Penny says as recently as last month Fonterra was still forecasting a 1% increase in production.