DairyNZ modelling shows El Niño could lift breakeven above $9/kgMS
DairyNZ has modelled two possible El Niño scenarios—Strong and Very Strong—in its EconTracker Quarterly Update. The analysis compares both with a baseline season without significant El Niño impacts and examines effects on farm costs, milk prices, feed expenses and production.
Under the baseline, the national breakeven milk price is modelled at $8.62/kgMS. That figure rises to $8.90/kgMS under a Strong El Niño and to $9.07/kgMS under a Very Strong event. Farm working expenses increase from $6.18/kgMS in the baseline to $6.57/kgMS and $6.78/kgMS in the two El Niño scenarios respectively.
National feed expenses account for part of the increase. DairyNZ models those costs at $1.56/kgMS in the baseline and $2.02/kgMS under a Very Strong El Niño. DairyNZ head of economics Mark Storey said pasture would be affected first and would be the largest source of additional cost pressure.
The modelling indicates that national milk production would be about 2.1% lower under a Strong El Niño and about 3.3% lower under a Very Strong event. DairyNZ said the North Island had the greatest exposure because farms there relied more heavily on rainfall and purchased feed, while the effects would vary between regions and individual farms.
Earth Sciences New Zealand has confirmed that El Niño conditions are developing in the tropical Pacific. The event is expected to strengthen through spring, reach its peak in early summer and affect New Zealand weather into autumn 2027. Chief scientist Chris Brandolino said a very strong event was taking shape and was more likely than not to be the strongest on record.
Brandolino said long-range modelling and comparisons with earlier very strong El Niño events favoured drier-than-usual conditions in northern and eastern New Zealand during spring and summer. Western and lower parts of the South Island were more likely to experience wetter-than-usual conditions. He said people should follow updated outlooks and forecasts because conditions could change.
Storey said the dairy sector remained in a relatively strong financial position and had experience managing volatility, but farm expenses had risen significantly in recent seasons. The national breakeven milk price had already been forecast at $8.62/kgMS before significant El Niño effects were included, and DairyNZ did not expect expenses to fall significantly in the 2027/28 season. Farm Systems Team Manager Steve Veix advised farmers to update feed budgets, monitor pasture growth and cover, and establish trigger points for action as conditions developed.
