Ah Tatua, You've Done It Again!
Waikato milk processor Tatua has again declared a record milk payout to farmer shareholders, leaving other processors in the dust.
The longer high prices last, the better for the farmgate milk price. Fonterra's mid-point forecast price is sitting at $9.25/kgMS.
The co-op could lift the mid-point when it announces its annual results for the 2025-26 season later this month.
Last week's Global Dairy Trade (GDT) auction saw the skim milk powder (SMP) price jump 5.3% to US$3695/metric tonne. Whole milk powder (WMP) dipped slightly to US$3585/MT.
NZX head of dairy insights Cristina Alvarado says the auction delivered a more resilient result than the increase in seasonal supply might have suggested.
Milk powder demand remained firm, while milk fat declines were more contained than at the previous event, she says.
"With deliveries moving further into the seasonal stockpiling window ahead of Christmas, Chinese New Year and the beginning of Ramadan, buying activity has held despite the normal increase in volumes offered during this period," she says.
For Alvarado, the clearest signal from the event was continued strength in protein demand.
She noted that SMP was sitting US$110/t above WMP.
"The increase occurred despite SMP volumes rising 9.6% from the previous event, although volumes remained 5.8% below the same event last year.
"WMP, meanwhile, eased just 0.1%, despite Fonterra offering 7.9% more than at the previous event and 13.0% more than a year earlier.
"This suggests that additional supply was absorbed relatively comfortably rather than creating significantly downward pressure."
Alvarado says the result reinforces the increasingly divergent dairy market: protein demand is providing price support despite higher powder availability, while fats remain under the pressure and cheese faces a much heavier supply burden.
"The resilience of powders will remain important as Northern Hemisphere milk production responds to the effects of recent heatwaves and drought," she says.
ANZ agri economist Matt Dilly says processors are making a dent into 2026/27 sales at good prices, especially for milk powders.
He also points out that milk powders are the main drivers of higher dairy prices in recent months, offsetting weakness in milk fats.
The price spread between butter and SMP is a good way to look at this, he says.
In 2025, butter was US$5000/MT more expensive than SMP. Today the price spread is a much more reasonable US$2000/MT.
While butter demand is just as strong as ever, a concerted effort to increase production has helped turn the market back from its peaks in late 2024 and early 2025.
Dilly says dairy farmers are increasingly focusing on the milkfat component of their milk production, leading to sustained gains in production.
