Report Highlights:

The second successive year of low dairy prices is taking its toll on New Zealand dairy farmers both financially and on herd numbers. Forecast milk supply is set to drop by two percent to 21.4 million metric tons in 2015. This is likely to be followed by a further fall in 2016 of three percent to 20.8 million metric tons. Both dairy production and exports will follow the same direction.

Executive Summary

Note: the Marketing Year (MY) is the same as the calendar year (CY). For example in the report “2015" is used which means the marketing year.

Low farmgate milk prices are now affecting New Zealand's milk production. Even though, in the absence of widespread drought, there was a stronger first half (H1) production for the 2015 year (1.1% above H1 2014) this will not be enough to prevent milk production for the whole year decreasing to an estimated 21.39 million(m) metric tons(MT). This will represent a 2.3% reduction on the production in the previous year, 2014. Cow numbers are declining and are estimated in October 2015 to be 75,000 head below the same time in 2014. The winter and early spring (June to mid-September) for 2015 has been colder than the last two years. This has negatively affected pasture growth. In order to minimize on-farm costs farmers are minimizing the rates of supplementary feeding which is likely to impact on production for the second half of 2015 now forecast to be 5% back on the same period in 2014.

Milk production in 2016 will continue to falter and is forecast at 20.75m MT, three percent below the 2015 estimate. Low forecast milk prices; reduced cow numbers; and the prospect of an El Nino drought are the dynamics at play.

Total dairy commodity and consumer goods production for New Zealand in 2015 is forecast to be 2.93m MT compared with 2014 at 3.05m MT. This amounts to a four percent reduction, which reflects the forecast reduction in 2015 milk supply. Continuing this trend in 2016 it is forecast total dairy production will reduce a further three percent to 2.86m MT. Total export volumes, although buffered to some extent by ending stock reductions, will reflect the production drops by reducing to 3.03m MT (-0.5%) in 2015 and further in 2016 to 3.01m MT (-0.7%).

Less milk supply for 2015 through 2016; and the increased processing capacity now in operation gives the dairy processors better product optionality. It will allow an increased volume of milk at the margin to be switched from one product to another. This has already been evident in 2015 as Cheese, liquid UHT milk, Casein, Whey products, and Milk Protein Concentrates have already recorded increased export shipments. It will have even more of an effect potentially at peak milk flow in October through early December in 2015 and 2016.

New Zealand's key commodity produced is Whole Milk Powder (WMP) but at an estimated 1.38m MT in 2015 this will be six percent below the 2014 total. As a direct consequence it is likely WMP exports will also be down. They are now estimated at 1.36m MT for 2015, which would be 4.4% below 2014. This slide is forecast to be halted in 2016 with both production and exports of WMP to be essentially the same as 2015.

The other big mover in the main commodities is cheese. Production for 2015 is now estimated at 347,000MT, seven percent up on 2014. Year-to-date export data, shows cheese exports are 20% ahead of the same period in 2014 and cheese prices during 2015 have been at enough of a premium over WMP to justify extra production. Total cheese exports for 2015 are forecast at 319,000MT. This situation is likely to reverse in 2016 as the price relativity between WMP and cheese starts to favour WMP again. For 2016, cheese production is forecast at 310,000MT and exports back to 2014 levels at 278,000MT.

Milk Supply

2015

Stronger milk production in the first half of the year (1.1% above H1 2014) in the absence of widespread drought combined with forecasts for the second half of 2015, which are lower than previous estimates, will result in an estimate for milk production of 21.39 million MT. This is virtually the same as the previous estimate for 2015 but represents a 2.3% reduction on the production for 2014. The key factors which are driving production now are:

  • A second successive NZ production season of low farmgate milk prices. Fonterra, the farmer owned Cooperative which collects approximately 85% of the milk has just improved its forecast farmgate price for the June 2015 to May 2016 production season from NZ$3.85/kg Milk Solids up to NZ$4.60. Only Tatua, the smallest Cooperative is breaking with general price forecasts in the NZ$4 to NZ$5.00 bracket with a NZ$6.00 estimate. The low prices are driving farmers to cut costs especially for supplementary feeding and off-farm agistment of replacement heifers and cows between lactations. This will have a negative impact on milk supply.
  • Cow numbers are declining. Even though a June 30, 2015 survey of in-calf dairy cows suggested that numbers were 25,000 head above the number in 2014 the cow kill for 2015 is estimated to be 100,000 head or ten percent greater than 2014. The 2014 slaughter total was historically high but within a range where herd numbers could be maintained. Since June the cow kill has continued to be elevated and it is estimated that by October 2015 the number of cows actually being milked will be 75,000 head less than 2014.
  • The winter and early spring (June to mid-September) for 2015 has been colder than the last two years. This has negatively affected pasture growth. In the absence of increased rates of supplementary feeding it is highly unlikely milk production in the spring of 2015 will reach the same levels as 2014. It is forecast that production for the 2nd half of 2015 will be five percent back on the same period in 2014

2016

Milk production in 2016 will continue to falter and is forecast at 20.75m MT, three percent below the 2015 estimate. The factors mentioned for 2015 will continue to drive milk production in 2016 with one addition:

  • Drought: most meteorological services are predicting a strong El Nino weather pattern over the next six months. For New Zealand this often means drought conditions on the east coasts of both islands and may mean drought in the Waikato which still produces approximately 30% of the country's milk. At this stage assumptions for milk supply in the first half of 2016 allow for a medium level drought event but not generalized drought conditions over the whole country.

The continuing themes from the 2015 will be likely to play out in the following ways:

  • Reduced cow numbers: The full extent of reductions to the dairy herd won't be completely felt until the second half of 2016. It is forecast that dairy cow numbers will be reduced by 100,000 head to 5.10m head at June 30, 2016.
  • Milk prices: Unless farmers get plenty of warning of a significant milk price increase (to somewhere around NZ$6.50/kg MS) for the 2016/17 production season the combination of reduced cow numbers and continued minimization of spending on supplementary feed is likely to mean production in the second half of 2016 will be similar to the same period in 2015 if not less.

Dairy, Milk, Fluid(1000HD, 1000MT)

2014

2015

2016

Market Year Begin: Jan 2014

Market Year Begin: Jan 2015

Market Year Begin: Jan 2016

New Zealand

Official

Old Post

New Post

Official

Old Post

New Post

Official

New Post

Cows In Milk

5264

5264

5175

5200

5214

5200

5100

Cow's Milk Production

21893

21893

21893

21675

21410

21391

20745

Other Milk Production

0

0

0

0

0

0

0

Total Production

21893

21893

21893

21675

21410

21391

20745

Other Imports

2

2

2

2

2

2

2

Total Imports

2

2

2

2

2

2

2

Total Supply

21895

21895

21895

21677

21412

21393

20747

Other Exports

136

136

136

160

160

165

200

Total Exports

136

136

136

160

160

165

200

Fluid Use Dom. Consum.

495

495

495

495

495

497

497

Factory Use Consum.

21214

21214

21214

20972

20707

20681

20000

Feed Use Dom. Consum.

50

50

50

50

50

50

50

Total Dom. Consumption

21759

21759

21759

21517

21252

21228

20547

Total Distribution

21895

21895

21895

21677

21412

21393

20747

CY Imp. from U.S.

0

0

0

0

0

0

0

CY. Exp. to U.S.

0

0

0

0

0

0

0

TS=TD

0

0

0

0

0

0

0

Dairy Production and Inventories

General Overview

Total dairy commodity and consumer goods production for New Zealand in 2015 is forecast to be 2.93m MT compared with 2014 at 3.05m MT. This amounts to a four percent reduction, which reflects the forecast reduction in 2015 milk supply. Continuing this trend in 2016 it is forecast total dairy production will reduce a further three percent to 2.86m MT.

For New Zealand trends in dairy production are driven by two factors: the existing productive capacity for each product and the export pricing for each commodity both current and expected outlook.

Less milk supply for 2015 through 2016 and the increased processing capacity now in operation gives the dairy processors better product optionality. It will allow an increased volume of milk at the margin to be switched from one product to another. This in-turn will mean the companies can be more responsive to changes in relative product price. This has already been evident in 2015 as: Cheese; liquid UHT milk; Casein; Whey products; and Milk Protein Concentrates (MPC) have already recorded increased export shipments. It will have even more of an effect potentially at peak milk flow in October through early December in 2015 and 2016.

A Guide to Inventory levels

It is estimated the ending stock level of the main commodities WMP, SMP, AMF/Butter, and cheese will remain stable from 2014 to 2015 at 415,000MT. Then by the end of 2016 be reduced by 25,000MT, or six percent. Some commentators have suggested stocks in New Zealand have risen to high levels, however industry participants disagree and argue inventory levels are within a close range around 15% of exports which is considered normal, as shown by Posts estimates.

By looking at the percentage each year's exports is of the preceding year and calculating the same for each year's milk production then charting the ratio of export change each year over the production change it is a guide to whether stocks are building up or dropping. A ratio of one would mean stocks are roughly in balance. A ratio of greater than one would mean that export growth was leading production and stocks would be run down. Whereas a ratio of less than one would mean exports had slowed in relation to production and stocks would likely to be rising. Since 2010 the dairy companies are matching export growth very closely to production growth and it is very unlikely there is any abnormal buildup of stocks.

Whole Milk Powder (WMP)

At 1.38m MT, production of WMP in 2015 is likely to be six percent down on the previous year. Exports are already 40,000MT behind for the year-to-date (YTD) July compared with 2014 and it is very unlikely that stocks were building up by mid-year. It is envisaged that production through the 2nd half of 2015 will be similar or less than the same period last year. With prices for WMP starting to move up there will no great rush to sell WMP at this stage. The increased product optionality available to the processors in the 2nd half of 2015 will mean that WMP production can be kept to a manageable level to suit the market.

For 2016 WMP production is likely to hold at 1.38m MT as profitability returns to WMP manufacturing, even though overall milk supply is decreasing. The product optionality now available would mean that WMP production could be ramped up quickly if price relativities warrant it.

Dairy, Dry

2014

2015

2016

Whole Milk Powder

Market Year Begin: Jan 2014

Market Year Begin: Jan 2015

Market Year Begin: Jan 2016

New Zealand

USDA Official

Old Post

New Post

USDA Official

Old Post

New Post

USDA Official

New Post

Beginning Stocks

157

157

157

181

181

180

180

Production

1,460

1,460

1,460

1,365

1,440

1,375

1,375

Other Imports

2

2

1

2

2

3

3

Total Imports

2

2

1

2

2

3

3

Total Supply

1,619

1,619

1,618

1,548

1,623

1,558

1,558

Other Exports

1,423

1,423

1,423

1,350

1,425

1,360

1,359

Total Exports

1,423

1,423

1,423

1,350

1,425

1,360

1,359

Human Dom. Cons.

2

2

2

2

2

3

4

Other Use, Losses

13

13

13

15

15

15

15

Total Dom. Cons.

15

15

15

17

17

18

19

Total Use

1,438

1,438

1,438

1,367

1,442

1,378

1,378

Ending Stocks

181

181

180

181

181

180

180

Total Distribution

1,619

1,619

1,618

1,548

1,623

1,558

1,558

CY Imp. from U.S.

0

0

0

0

0

0

0

CY. Exp. to U.S.

0

3

3

0

2

3

2

TS=TD

0

0

0

0

0

0

0

Cheese

Cheese production for 2015 is now estimated at 347,000MT, seven percent up on 2014. Production for 2014 has now been adjusted upward in response to the rate of export shipping in the first quarter of 2015 which would have been enabled by a run up in cheese stocks at year end 2014. The run of increased cheese production is not expected to last. The slow down in milk supply in 2016 and the likelihood other commodity price relativities will catch up with cheese is likley to mean production in 2016 will be reduced to 310,000MT. This would represent an eleven percent reduction over 2015.

Since May 2015 the GDT auction prices have favoured cheese production. A general rule of thumb suggests that cheese manufacture becomes more profitable than WMP when the cheese price in USD exceeds the WMP price by more than USD500/MT. Since May the cheese price has consistently exceeded the WMP price by more than USD500/MT. Export markets for cheese open to New Zealand are finite which means changes will be marginal rather than a significant diversion of the milk supply to cheese.

Dairy, Cheese New Zealand

2014

2015

2016

Market Year Begin: Jan 2014

Market Year Begin: Jan 2015

Market Year Begin: Jan 2016

(1000 MT)

USDA Official

Old Post

New Post

USDA Official

Old Post

New Post

USDA Official

New Post

Beginning Stocks

50

50

50

55

55

64

60

Production

316

316

325

338

308

347

310

Other Imports

7

7

7

6

7

8

8

Total Imports

7

7

7

6

7

8

8

Total Supply

373

373

382

399

370

419

378

Other Exports

278

278

278

320

275

319

278

Total Exports

278

278

278

320

275

319

278

Human Dom. Cons.

40

40

40

39

40

40

40

Other Use, Losses

0

0

0

0

0

0

0

Total Dom. Cons.

40

40

40

39

40

40

40

Total Use

318

318

318

359

315

359

318

Ending Stocks

55

55

64

40

55

60

60

Total Distribution

373

373

382

399

370

419

378

CY Imp. from U.S.

0

1

1

0

1

1

1

CY. Exp. to U.S.

1

7

7

0

6

14

7

TS=TD

0

0

0

0

0

0

0

Skim Milk Powder (SMP)

SMP prices are very low now both absolutely and relative to WMP and Cheese. The only reason the value of the manufacturing combination of SMP and AMF/Butter hasn't sunk lower relative to WMP and Cheese is the strength of butter and AMF prices. SMP production in 2014 has been amended upward to 415,000MT to show an increased ending stock number of 113,000MT which has fueled a higher rate of export shipping in the first half of 2015 than was expected. However it is expected that SMP production will be reduced by 13% in 2015 to be 360,000MT. The protein side of cream/fat production is being further processed to Casein, Whey and Milk Protein Concentrate production in 2015. This isn't likely to be the case in 2016 but it is not expected that SMP production will improve and it is forecast to sit at 360,000MT again.

Dairy, Milk, Nonfat Dry

2014

2015

2016

New Zealand

Market Year Begin: Jan 2014

Market Year Begin: Jan 2015

Market Year Begin: Jan 2016

(1000 MT)

USDA Official

Old Post

New Post

USDA Official

Old Post

New Post

USDA Official

New Post

Beginning Stocks

83

83

83

93

93

113

91

Production

395

395

415

385

375

360

360

Other Imports

2

2

4

2

2

5

4

Total Imports

2

2

4

2

2

5

4

Total Supply

480

480

502

480

470

478

455

Other Exports

383

383

383

405

375

380

364

Total Exports

383

383

383

405

375

380

364

Human Dom. Cons.

4

4

6

4

4

7

7

Other Use, Losses

0

0

0

0

0

0

0

Total Dom. Cons.

4

4

6

4

4

7

7

Total Use

387

387

389

409

379

387

371

Ending Stocks

93

93

113

71

91

91

84

Total Distribution

480

480

502

480

470

478

455

CY Imp. from U.S.

0

0

1

0

0

0

0

CY. Exp. to U.S.

0

0

0

0

0

0

0

TS=TD

0

0

0

0

0

0

0

Butter and Anhydrous Milk fat (AMF)

It is envisaged that 2015 butter and AMF production will dip slightly below previous forecasts as milk production slows to be 570,000MT (butter equivalents), which represents a 1.7% reduction year-on-year. The export shipping rate for the year-to-date (YTD) has slowed significantly compared to 2014 and isn't expected to regain lost ground in the second half of the year. This will allow a buildup of inventory to maintain consistency of supply to the growing number of food service customers.

Butter and AMF products are manufactured from the cream separated from the SMP powder stream and from surplus fat in the WMP manufacturing process.

Dairy, Butter

2014

2015

2016

New Zealand

Market Year Begin: Jan 2014

Market Year Begin: Jan 2015

Market Year Begin: Jan 2016

(1000 MT)

USDA Official

Old Post

New Post

USDA Official

Old Post

New Post

USDA Official

New Post

Beginning Stocks

54

57

54

53

60

57

81

Production

580

580

580

565

580

570

550

Other Imports

1

1

1

1

1

1

1

Total Imports

1

1

1

1

1

1

1

Total Supply

635

638

635

619

641

628

632

Other Exports

560

556

556

540

559

525

545

Total Exports

560

556

556

540

559

525

545

Domestic Cons.

22

22

22

22

22

22

22

Total Use

582

578

578

562

581

547

567

Ending Stocks

53

60

57

57

60

81

65

Total Distribution

635

638

635

619

641

628

632

CY Imp. from U.S.

0

0

0

0

0

0

0

CY. Exp. to U.S.

30

31

31

30

30

30

30

TS=TD

0

0

0

0

0

0

0

Dairy Exports

Dairy Exports at a Glance

New Zealand Summary Table for Dairy Product Export Quantities

Commodity Group

2014

2015

2016

(1000s Metric Tons)

Actual

Estimated

% change from prev. year

New Forecast

% change from prev. year

WMP

1,423

1,360

-4.4%

1,359

-0.1%

SMP

383

380

-0.8%

364

-4.2%

Butter/AMF

556

525

-5.6%

545

3.8%

Cheese

278

319

14.7%

278

-12.9%

Liquid Milk

136

165

21.3%

200

21.2%

Sub-Total PSD Exports

2,776

2,749

-1.0%

2,746

-0.1%

Casein

81

90

11.5%

75

-16.7%

Whey Products

24

28

16.6%

28

0.0%

Milk Protein Concentrates

72

84

17.1%

75

-10.7%

Other Products

52

48

-7.6%

48

0.0%

Infant Milk Formula

42

31

-26.2%

36

16.1%

Total Exports

3,046

3,030

-0.5%

3,008

-0.7%

Exports broadly follow production. Domestic consumption, which is expected to be stable, is such a small component of the overall production, supply, and demand mix for New Zealand is doesn't really influence the direct relationship between production and exports. The overall export volume is expected to be stable at just over 3m MT in both 2015 and 2016.

Whole Milk Powder

WMP exports in 2015 are expected to be down by 4.5% on 2014 at 1.36m MT. By July 2015 YTD exports were five percent behind the same period in 2014. With the lower spring (September-November) milk production peak and the increased optionality for product mix it is unlikely that this gap will be recovered. Exports of WMP in 2016 are expected to remain at 1.36m MT. Milk supply may be decreasing but the likely recovery in demand/market price for WMP will probably mean WMP consumes a greater share of the milk supply in 2016.

New Zealand Export Statistics for Whole Milk Powder

Calendar Year: 2012 - 2014

Partner Country

2012

2013

2014

Quantity(metric tons)

FOB Price USD/T

Quantity(metric tons)

FOB Price USD/T

Quantity(metric tons)

FOB Price USD/T

China

423,435

$3,238

622,133

$4,435

587,631

$4,363

United Arab Emirates

91,893

$3,442

76,635

$4,067

112,579

$4,338

Algeria

75,426

$3,319

32,752

$3,882

95,030

$3,750

Malaysia

41,703

$3,467

36,829

$4,030

59,448

$4,035

Sri Lanka

56,927

$3,438

45,339

$3,789

47,154

$4,466

Saudi Arabia

42,512

$3,295

27,548

$4,075

45,485

$4,259

Thailand

30,132

$3,178

31,609

$4,302

38,799

$4,370

Nigeria

30,777

$3,433

27,123

$4,254

35,094

$4,293

Indonesia

32,690

$3,379

24,086

$4,219

33,371

$4,258

Singapore

30,635

$2,884

35,123

$3,686

39,331

$3,579

Rest of World

405,148

$3,639

332,283

$4,296

329,019

$4,252

World Total

1,261,278

$3,404

1,291,460

$4,290

1,422,941

$4,255

Cheese

It is now estimated for 2015 total cheese exports will reach 319,000MT which would equate to a 16% turn up from earlier estimates. Oceania cheese has been priced competitively over the last six months and the margins above WMP prices have been enough to warrant extra production of cheese. For 2015 YTD exports from New Zealand are nearly 20% greater than the same period in 2014. The two companies which manufacture the greatest amount of cheese are both saying they are emphasizing cheese production.

With less milk supply in 2016 and the likelihood of increased WMP pricing it is expected cheese exports will reduce broadly in line with production decreases. It is forecast exports will be 278,000MT, a 13% reduction on 2015.

Cheese as a food service ingredient is becoming significant now. Fonterra announced in mid-July 2015 it was commissioning additions to its mozzarella plant at its Clandeboye facility in the South Island which would double its capacity. Fonterra's process to make mozzarella vastly reduces the time required and reputedly is very much more profitable than making cheddar. The main markets are China and S.E.Asia for pizza toppings.

Skim Milk Powder (SMP)

Exports for 2015 are estimated to be 380,000MT just under one percent down on 2014. The extra inventory taken into 2015 has facilitated extra shipments of SMP in the first half of 2015 which are up 13% for the 2015 YTD July over the same period in 2014. However by all accounts the world is fully supplied with SMP at present and forward into next year with pricing very shaky at the moment. New Zealand processors are likely to minimize the amount of SMP being produced in favor of producing increased quantities of Milk Protein Concentrates; Casein and Caseinates; and Whey products from the protein stream when cream is separated off for butter and AMF.

The forecast for SMP exports in 2016 reduces the volume to 364,000MT. This is a four percent reduction but inventories would be reduced eight percent to achieve it. It is unlikely to be much lower than this level as New Zealand exporters have a core group of customers through Asia and the Middle East that they would aim to maintain supply to.

New Zealand Export Statistics for Skim Milk Powder

Calendar Year: 2012 - 2014

Destination Country

2012

2013

2014

Qty (MT)

Av. FOB Price/MT

Qty (MT)

Av. FOB Price/MT

Qty (MT)

Av. FOB Price/MT

China

100,851

$3,224

132,527

$4,251

114,949

$4,051

Malaysia

34,593

$3,472

36,106

$4,195

33,376

$4,280

Philippines

30,738

$3,229

34,958

$4,179

30,591

$4,273

Indonesia

37,413

$3,180

33,780

$4,083

26,918

$4,321

Singapore

21,269

$3,169

23,575

$3,920

29,049

$3,873

Thailand

22,545

$2,995

15,816

$4,086

20,580

$4,044

Saudi Arabia

23,761

$3,192

10,112

$4,201

17,768

$4,432

Taiwan

12,055

$3,246

14,841

$4,216

18,674

$4,215

Japan

5,929

$3,549

7,251

$3,958

16,480

$3,883

UAE

3,900

$3,143

6,322

$4,196

9,710

$3,992

Rest of world

96,570

$3,285

76,681

$4,045

64,875

$4,049

World Total

389,624

$3,244

391,969

$4,149

382,970

$4,110

Butter and Anhydrous Milkfat (AMF) Exports

Current year exports to date (July) are running 9.5% behind the same period in 2014. It is not envisaged that they will lose any more ground in the second half of 2015 and will finish at 525,000MT (butter equivalents) which would be six percent down on 2014.

Exports in 2016 are expected to bounce back to 550,000MT by running down inventories, even though production is expected to drop in-sync with less milk production. Decreases in shipments to China seem to be the major reason why exports are reduced in the first half of 2015. It is expected that Chinese end users for butter and AMF will have reduced their inventories by the first half of 2016 and will look to secure additional supply then. Fonterra has put out several press statements over the recent past highlighting its drive to increase its foodservice ingredients sales especially in Asia, in which fat products such as butter and AMF form a major share.

New Zealand Export Statistics For Butter, Anhydrous MilkFat, & Dairy Spreads

Calendar Year: 2012 - 2014

Partner Country

2012

2013

2014

Qty (MT)

Av. FOB Price/MT

Qty (MT)

Av. FOB Price/MT

Qty (MT)

Av. FOB Price/MT

China

43,349

$3,683

52,508

$4,186

67,905

$4,275

Egypt

37,746

$3,329

32,111

$3,765

34,556

$4,132

Iran

40,791

$3,593

30,378

$4,071

26,680

$4,404

Saudi Arabia

21,720

$3,513

17,394

$3,769

27,153

$4,142

United States

26,862

$3,377

16,474

$3,792

25,880

$4,099

Philippines

15,482

$3,589

14,521

$4,218

21,449

$4,606

Azerbaijan

17,509

$3,431

13,247

$3,966

21,876

$4,152

Russia

23,672

$3,145

22,270

$3,857

16,479

$4,789

Australia

18,957

$3,574

18,675

$3,895

19,696

$3,955

Algeria

9,120

$3,677

14,278

$4,218

15,911

$4,893

Rest of world

207,870

$3,483

229,290

$3,931

232,294

$4,112

World Total

463,078

$3,486

461,146

$3,960

509,879

$4,214

Imports

Lactose

Used to standardize WMP production, lactose imports have grown from 76,477MT in 2012 to 102,567 MT in 2014. This includes MPC from USA which is actually lactose made as a by-product from the MPC manufacture process. Forty one percent or 42,213 MT of the total volume in 2014 was sourced from the U.S. Lactose makes up approximately ten percent of the volume of WMP. So the amount imported standardizes approximately one million metric tons of the total WMP produced. There is still some WMP produced un-standardized as the amount of lactose available domestically would not cover the balance of WMP production.

One of the by-products of the new MPC facility Fonterra has built in the South Island is lactose. This facility was commissioned in mid-2015. In July 2015 at Heerenveen in the Netherlands Fonterra opened a whey and lactose processing site, which sources the raw materials from a cheese factory alongside the site. The cheese factory is operated by Dutch dairy processor Royal A-ware. The facility will produce 5,000MT of whey protein and 25,000MT of lactose annually. This lactose may be imported into NZ to be used in WMP manufacture and could compete with US imports especially while WMP production is reduced over the next 18 months.

However so far in 2015 there has been no letup in the rate of lactose being imported. Up to July 2015 41,609MT had entered which was two percent up on the same period in 2014. The US supplied 63% of the volume.