Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
At least one analyst is now predicting an all-time record farmgate milk price this season.
Falling milk production in New Zealand and other key dairy producer markets mean weak global supply, and this is expected to keep prices up.
Westpac senior agri economist Nathan Penny says it has upgraded its 2021-22 farmgate milk price forecast by 75 cents to $8.50/kgMS.
If achieved, this would be a record high, surpassing the previous record of $8.40/kgMS set back in 2013-14.
Fonterra is sticking with a wide ranging milk price forecast - between $7.25 and $8.75/kgMS and a midpoint of $8.
Penny says the key catalyst for the forecast revision is the significant downgrade to NZ production forecast for the season.
"We now expect New Zealand production to fall this season, and along with soft production in other key dairy producters, we expect weak global supply to underpin global dairy prices at or around current high levels for at least the rest of the year."
He expects NZ milk production to fall by 1% compared to last season, a change from its previous prediction of a 1% rise.
"New Zealand production has started the season on the back foot," says Penny.
"Winter and spring so far have been either wet or cold or both in many parts of the country. As a result, production for the first three months of the season is running at 1.8% behind the same stage of last season.
"We expect this production softness to continue in the short term."
Meanwhile, dairy production elsewhere is also soft. Weather has also impacted European production, with production for the first seven months of the year down 0.1% compared to the same time a year ago. In addition, Chinese (domestic) and US production continue to be constrained by very high feed costs and limited feed availability.
Last week's Global Dairy Trade auction recorded a flat result after several rise in prices.
Whole milk powder (WMP) prices, used as a benchmark to set the farmgate milk price, have lifted by around 5% since August.
ASB economist Nat Keall notes that dairy prices remain well above long-run averages.
He says not too much should be read into WMP prices dipping 0.4% last week to US$3,749/metric tonne.
"Given the current strength in prices, anything other than a sharpish decline at each auction continues to imply a solid farmgate price for the season," he says.
ASB is sticking to its forecast milk price of $8.20/kgMS.
Keall notes that the overall GDT price index remains up around 30-40% on the same point in the last three dairy seasons.
He agrees that milk supply could be tight in the coming months.
"Production data is increasingly pointing to tighter supply over the remained of the season," he says.
Phoebe Scherer, a technical manager from the Bay of Plenty, has won the 2025 Young Grower of the Year national title.
The Fencing Contractors Association of New Zealand (FCANZ) celebrated the best of the best at the 2025 Fencing Industry Awards, providing the opportunity to honour both rising talent and industry stalwarts.
Award-winning boutique cheese company, Cranky Goat Ltd has gone into voluntary liquidation.
As an independent review of the National Pest Management Plan for TB finds the goal of complete eradication by 2055 is still valide, feedback is being sought on how to finish the job.
Beef + Lamb New Zealand has launched an AI-powered digital assistant to help farmers using the B+LNZ Knowledge Hub to create tailored answers and resources for their farming businesses.
A tiny organism from the arid mountains of mainland Greece is facilitating a new way of growing healthier animals on farms across New Zealand.
OPINION: Westland Milk may have won the contract to supply butter to Costco NZ but Open Country Dairy is having…
OPINION: The Gene Technology Bill has divided the farming community with strong arguments on both the pros and cons of…