DairyNZ Predicts 'Two in a Row' for Bumper Milk Prices
New Zealand's dairy farmers may experience unprecedented prosperity during the 2025-2026 season, as DairyNZ projects a $10.13/kg MS payout. Such a continuation of high prices, following the $10.04/kg MS average forecast for the 2024-2025 season, would break a 25-year trend of high payouts followed by significant drops.
According to DairyNZ's head of economics, Mark Storey, current international supply and demand dynamics are favorable, aligning with projections from major banks. Farm expenses are expected to average $5.94/kg MS, with breakeven prices at $8.57/kg MS. Despite stable input costs, some increases in electricity and anticipated higher spending on inputs like feed and fertiliser as farmers adjust to these rewarding conditions is expected.
The backdrop of geopolitical uncertainty and potential risks in international markets, such as trade tensions and recession fears in the US, poses challenges. Nonetheless, optimism remains about maintaining high payouts without the usual alternating cycle of peaks and troughs. A potential uplift in New Zealand's trade dynamics with India's free trade negotiations is also on the horizon.
Farmers are advised to use this period to solidify financial resilience through debt reduction, which has already led to historically low debt-to-asset ratios in the past decade. The forthcoming season continues to hold much promise, encouraging prudent financial strategies and optimism for the sector's future.
