According to NZ Herald, sustained global protein demand continues to support elevated farmgate milk prices in New Zealand and may signal the emergence of a new long-term pricing paradigm for the industry.

Last season, Fonterra paid farmers a record NZ$10.16 per kilogram of milksolids. The current season forecast stands at NZ$9.50/kg, while NZX futures indicate prices remaining around NZ$9.50 through 2027, with a potential easing to NZ$9.00 in 2028. For comparison, DairyNZ estimates the breakeven level at approximately NZ$8.50/kg.

Atypical Market Dynamics

Unlike previous cycles — where high prices typically triggered herd expansion followed by market correction — the current environment shows simultaneous growth in both production and prices.

In the 12 months to January:

  • Milk production increased by 1.8% (+2.4% in milksolids terms).
  • The Global Dairy Trade index rose by 18% after a late-2025 downturn.

For the 2024/25 season:

  • 21 billion litres of milk were processed.
  • Milksolids reached 1.94 billion kg.
  • Milk volumes grew by 2.3%; milksolids by 2.9%.

Average productivity reached a record 414 kg of milksolids per cow, despite a 0.5% reduction in herd size to 4.68 million cows. Productivity per hectare stood at 1,137 kg — matching the 2020/21 record.

Strong Financial Performance

Following the sale of the Mainland asset to Lactalis, farmer-shareholders will receive:

  • NZ$2 per share in capital return;
  • A special dividend of 14–18 cents per share;
  • Regular dividend payments.

Total distributions are estimated at NZ$4.2 billion for the financial year.

Structural Consolidation

The sector continues to consolidate:

  • Herd numbers declined to 10,370.
  • Average herd size increased to 451 cows.

Dairy exports reached a record NZ$27.15 billion in the year to June 2025 (+17% year-on-year). The dairy sector now accounts for more than one-quarter of New Zealand’s total export earnings.

Outlook

The combination of steady global protein demand, rising productivity, and strong export performance supports expectations that elevated milk prices could persist in the medium term.

Source: NZ Herald