Fonterra warns of huge cost of drought

Dairy co-operative Fonterra is warning that the worsening drought in key regions could cost dairy farmers as much as $500 million by the time the season ends in May.

It says the dry conditions have already cost farmers about $60m in reduced payments as milk production dries up.

Compared with the last year, milk production is down 27% in the biggest dairy region, Waikato, and more than 20% in the Bay of Plenty.

Fonterra chairman Henry van der Heyden says costs will continue to mount unless there is significant rainfall.

However, Mr van der Heyden says that despite the drought Fonterra is sticking to its forecast of a record payout for dairy farmers.

Drought area widens

The drought area now covers Auckland to King Country, South Taranaki to northern Manawatu, and Hawke's Bay to Canterbury, with Southland also dry.

On Thursday, Waikato was designated a drought zone after the driest January in more than 100 years - the first such declaration ever in the dairy heartland.

Much of the area has not had rain since before Christmas with soil extremely dry and river levels dropping rapidly.

In South Taranaki, farmers have already stopped milking some cows and vets expect that three-quarters of farms will start drying off three months early to preserve herd condition for spring calving.

In Southland, hay and silage production has been halved and in Waikato feed prices are high, with a three-week wait to have surplus cows culled at meatworks.

Drought meeting

Agriculture and Forestry Minister Jim Anderton will hold a meeting with primary industry leaders about the drought on 12 February.