Fonterra Cooperative Group's New Zealand milk collection fell 4 percent in February from a year earlier, as difficult weather conditions weighed on pasture quality and feed growth rates.

The country's dominant milk processor collected 135.3 million kilograms of milk solids in February from 140.9 million kgMS a year earlier, taking the season-to-date collection to 1,171 million kgMS, down 2 percent from a year earlier, the Auckland-based cooperative said in its monthly global dairy update. It forecasts annual collection to be 1,480 million kgMS.

"Collection volumes decreased in most regions in February, as the impact of difficult weather conditions continues to effect pasture quality and feed growth rate," Fonterra said. "Despite more favourable weather conditions recently, the cooperative still expects its New Zealand milk volumes to be down for the year."

Fonterra is forecasting a farmgate payout of $6.55/kgMS reflecting better global dairy prices, and annual dividend payments of 25-to-35 cents per share. Last month, the dairy company reported a first-half loss of $348 million, including a $405 million impairment charge on its Beingmate Baby & Child Food investment and a $183 million settlement with Danone over the botulism scare in 2013.

Prices at tonight's GlobalDairyTrade auction are expected to be flat by traders at OMF, having dropped in the previous three events, with the average price at US$3,632 a tonne.

While Fonterra's New Zealand production is down, it's collection across the Tasman jumped 30 percent to 11 million kgMS in February from a year earlier, taking the season-to-date tally to 111 million kgMS, up 28 percent. Fonterra has successfully wooed Australian farmers disillusioned with Murray Goulburn over the past year, boosting its supply base across the Tasman.

"February collections were up 30 percent due to Fonterra’s increased market share and favourable seasonal conditions that continue to support production growth from both existing and new suppliers," it said.

Fonterra Shareholder Fund units rose 0.3 percent to $5.93.