Other restraints on the growth of milk production are the availability of on-farm labour and the rising costs of compliance, fuel and inputs.
The land area being used for dairy farming will also reduce during the next five years, analyst Susan Kilsby told the NZX Global Dairy Seminar in Singapore.
It was her last presentation as NZX dairy data and insight head before joining ANZ as its agricultural economist.
The land pressures are coming from urbanisation and some reversion of hill country to sheep and beef farming.
The report said stocking rates have stabilised at about 2.75 cows/hectare over the past decade and environmental legislation will reduce that slightly.
Fewer cows will be offset by continued productivity gains averaging 1.4% a year.
Another unknown will be the effects of palm kernel discouragement as a supplementary feed, implemented with financial penalties by Fonterra this season.
Close to 7% of all milk came from palm kernel feeding last season, up from 4% a decade ago.
Kilsby said a new bias towards milk fat production rather than milk protein has not shown up in production figures but will be a longer-term trend in the thoughts of dairy farmers.
It will very much depend on existing herd genetics, land characteristics and personal preferences for cow breeds whether farmers will make changes.
Dairy debt has fallen from a record $22.80/kg milksolids two years ago to about $22.30 today.
However, 10% of farms are still not profitable, despite two payout years above $6/kg.
Former Prime Minister Sir William English told the seminar the dairy industry will be a test of New Zealand’s ability to produce growth-enhancing environmental legislation.
Public opinion wants no environmental degradation from dairying so legislators have to find ways of delivering that through economic incentives, he said.
Fonterra’s Global Dairy Trade director Eric Hansen told the seminar the platform needs to evolve and expand.
The aims will be to enhance liquidity on existing products, establish multi-seller reference prices and act to make price discovery on United States and European products.
The GDT platform presentation on computer is also being upgraded with modern digital features to be launched in the second quarter of 2019.
GDT is investigating a European platform, has consulted the industry and is now working with vendors on a possible solution, Hansen said.
