Dry weather undercuts NZ dairy giant Fonterra's milk production

(Adds details on exports, collections and context)

March 29 (Reuters) - Dairy group Fonterra said on Friday its New Zealand milk production in February was largely flat from a year earlier, while Australian production fell sharply in January due to dry weather.

Australian milk production dropped 11 percent from January last year as sustained drought conditions led to higher input and farm costs, the world's biggest dairy exporter said in a statement to the New Zealand bourse.

Severe drought across parts of eastern Australian has hit cattle and other agriculture companies and crimped Australia's wheat exports last year.

Fonterra's milk collection in Australia plunged 28 percent in February from a year earlier, while New Zealand milk collection rose 4 percent. The dairy company had warned earlier in March of lower collections for the 2018/19 season.

However, dairy exports from New Zealand and Australia surged in January - up 16 percent and 32 percent respectively - due to stronger overseas demand for whole milk powder and infant formula, Fonterra said. China is a key market for its products.

The co-operative swung back to a first-half profit earlier this month, but flagged further headwinds from the challenging environment in Australia.

(Reporting by Ambar Warrick in Bengaluru; Editing by Subhranshu Sahu and Richard Pullin)

2019-03-29 07:22:11

© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.