Despite the drought, dairy exports have held up remarkably well, sitting at around similar levels to last year.4 However, with production well down on last year, some easing in dairy exports seems likely going forward. Further, it is unlikely that production will ever fully recover to pre-drought levels.
New Zealand dairy exports have recorded relatively modest growth over the past three years (around 3 percent p.a.). The recent boom in biofuel demand has further hindered global dairy supply. Strong demand for ethanol has seen corn prices, the primary source of livestock feed, advance over 50 percent in the past six months.