May 3, 2019 / 4:51 AM / 18 days ago

UPDATE 1-Fonterra's March NZ milk output falls; exports surge on China demand

(Adds export data, context)

May 3 (Reuters) - New Zealand dairy group Fonterra Co-Operative Group Ltd said on Friday local milk production in March dropped 8 percent year-on-year, but exports rose as Asian demand remained robust.

Exports from New Zealand surged 27 percent in February, the world’s largest dairy company said in a statement, with shipments to China increasing 11 percent over the month.

China makes up most of Fonterra’s market, as buyers in the mainland prefer internationally made whole milk powder and infant formula, over their local counterparts.

Australian milk production fell 13 percent in February as sustained drought conditions caused higher input costs in the region, Fonterra said.

Milk production across Australia and New Zealand fell as collections declined in the wake of dry weather conditions.

Severe drought across parts of eastern Australia has hit cattle and other agriculture companies and crimped the country’s wheat exports last year. It also prompted Fonterra to cut 2019 collection and earnings guidance, despite swinging to a first-half profit for the year.

Fonterra’s New Zealand milk collection declined 9 percent in March, while it fell 27 percent in Australia.

Reporting by Ambar Warrick in Bengaluru; Editing by Rashmi Aich

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