New Zealand dairy co-op Fonterra has reduced its milk volume forecast for the 2014-15 season, reflecting the impact of dry weather on production.

In a move that will boost global dairy market sentiment, the world’s largest dairy exporter said that it expects production of 1,532 million kilogrammes of milk solids this season. This would be 3.3% lower that the record 2013/2014 output. Their previous forecast in December had suggested that output would be similar to last season.

Fonterra’s Miles Hurrell said daily milk production was now 6.1% lower than at the same time last season, as farmers appear to be “using more traditional practices to manage their farm businesses with the low payout forecast”. This refers to more prudent use of supplementary feeds and targeted culling of poor performing cows.

He added: “In the first half of the season, excellent pasture conditions resulted in milk volumes being higher than the previous season. The situation has changed significantly over the course of this month.

“In some regions where pasture quality has declined markedly since mid-January, we are seeing some farmers drying off cows early. There also appears to be a reduction in feed supplements, as the economics do not support their widespread use this season,” said Hurrell.

New Zealand farmers are currently operating on a milk price forecast of $4.70 per kg of milksolids, which is just 21 cent per litre in Irish equivalents.

Fonterra confirmed that it can meet all current sales commitments, but it is planning to reduce the quantity of product offered on the GlobalDairyTrade auction platform. The GDT auction is scheduled for next Tuesday (February 3).

Irish dairy farmers have been advised to expect an average milk price of just 27 cent per litre for 2015. However, the recent weakening of the euro has fuelled optimism that Irish producers might be spared the worst of dairy market weakness this season.