ANZ Bank Lowers Farmgate Milk Price Forecast Amid Global Price Drop
ANZ Bank has announced a revision in its forecast for the farmgate milk price, reducing it to $9.65 per kilogram of milk solids for the 2025/26 season. This represents a 3.5% decrease from its earlier forecast of $10.00 per kgMS. The adjustment follows a broader trend of declining global dairy prices, which has prompted other financial institutions such as BNZ and NZX to also lower their forecasts to $9.50 and $9.49 per kgMS, respectively.
The decline in global dairy prices has been attributed to a surge in global supply, particularly in major dairy exporting markets like New Zealand. According to ANZ agricultural economist Matt Dilly, the GDT Price Index has fallen by 18% since its peak in May. A significant factor in this downturn has been the drop in whole milk powder (WMP) prices, which have decreased by 23.8% from their high of over USD4,470 per tonne to the current USD3,405.
In addition to WMP, butter prices, which drove the dairy market's dynamics last year, have also been affected. The increased production capacity in both the EU and US has resulted in higher fat components in milk, leading to more butter being produced, thus lowering prices.
Despite these challenges, the weak New Zealand dollar may provide some relief to dairy farmers. All eyes are now on Fonterra's upcoming quarterly update on December 4, which will include the first quarter FY2025 trading results. Fonterra's current forecast is a midpoint of $10/kgMS, but it may face pressure to adjust this figure downward in response to market conditions.
