New Zealand Milk Price Forecast for 2025-26: Challenges and Opportunities
The New Zealand dairy sector is poised to experience notable financial trends in the coming years. Matt Dilly, an agri economist at ANZ, predicts that although the exact price for the 2025-26 milk season is uncertain, it will likely exceed DairyNZ's breakeven price of $8.68/kgMS. Futures currently project a price of $10.10/kgMS, slightly below the forecast for the 2024-25 season. Both ANZ and Fonterra forecast the price at a steady $10/kgMS.
Despite these optimistic projections, Dilly cautions about potential downside risks. "Globally, dairy prices are high while feed costs are low, signaling potential for expanded production." He warns that simultaneous strong production years across major exporters could lead to supply catching up with demand, driving prices down.
In August, Fonterra announced a significant sale of its consumer businesses to Lactalis for $4.22 billion, planning a tax-free capital return of $2/share post-completion in early 2026. This is in addition to a healthy annual dividend expected this season.
Demand remains robust against the backdrop of high prices, with buyers purchasing only to cover short-term needs in hopes that increasing supply will lower prices. The 2024-25 season posed challenges for other exporters due to adverse conditions such as poor weather and disease impacts.
Emma Higgins from Rabobank notes that milk production is expanding globally, with US collections up by 3.4% year-on-year and New Zealand experiencing consecutive months of growth. Supportive prices and favorable conditions are driving this trend, but the increased supply could place downward pressure on prices.
