DairyNZ's Tracy Brown Flags El Nino Risk for Dairy Farms
Most dairy regions around the country have had a pretty good season so far says Tracy Brown.
That matters in moments like these. But if there’s one thing dairy farmers know, it’s that nothing stays the same for long.
Increased costs for feed, fuel and fertiliser have featured in past price shocks and inflationary cycles, and recent tensions in the Middle East have brought them back into focus as we look ahead to the 2026/27 season.
From a New Zealand perspective, the near-term issue is more about price, specifically input prices, than supply. For most farms, the immediate challenge is likely to be pressure on operating margin from higher input costs, more so than supply challenges.
With only a month or so remaining in the 2025/26 season, we would not expect to see a material shift in the season’s overall outlook. While milk and meat returns remain supportive, many farmers are already experiencing higher on‑farm costs, which is tightening operating margins as the season closes.
Looking ahead to the coming season, farmers may have some flexibility to defer or reprioritise certain costs, helping to manage short‑term risk and maintain control where it matters most.
Where to keep an eye out
Looking further ahead, supplementary feed cost remains the biggest area of exposure for our dairy farmers. Compared with fuel and fertiliser, feed makes up the largest share of on‑farm costs and, if prices rise, it’s usually the first area margin pressure shows up.
That’s why the fundamentals matter so much. New Zealand’s pasture‑based system remains a real strength. Getting the best return from pasture, while using supplementary feeds strategically, not only underpins profitability, but also provides resilience against farm input cost volatility.
Practical steps for right now
While global factors are outside our control, there’s still a lot farmers can do on‑farm:
- Make pasture work hard. Pasture is still our cheapest source of feed. Using feed budgets and regularly reviewing supplementary feed decisions can make a real difference.
- Be deliberate with spending. Prioritise fuel, fertiliser and contractor use where it directly supports pasture performance. Delay or combine lower‑return and non-urgent jobs where possible. Use only what you need to.
- Know your numbers. A re‑forecast or sensitivity check can help identify pressure points early and give you more options if conditions shift.
- Keep everyone involved. Talking things through with your trusted advisors and farm team often uncovers practical ideas to lift efficiency or reduce waste.
- Hold the line on welfare and the environment. We know these are non‑negotiable and underpin the long‑term resilience of our farms and our sector.
Looking ahead with confidence
Encouragingly, feedback from around the country suggests farmer confidence remains broadly positive. Feed positions are generally strong, payout sentiment is solid, and production is holding near or above last season in many regions.
Cull cows being held longer on farm this season has created some localised concerns about processing capacity later in autumn. Farmers are encouraged to be proactive in their planning around this. Compared with many competing dairy regions globally, New Zealand is still well positioned. Our pasture‑based systems rely less on imported feed and long transport chains, which gives us a comparative advantage during periods of global input cost stress.
The main risk from ongoing global tensions is not an immediate disruption to production, but a gradual squeeze on operating margins if higher energy, feed and freight costs persist into 2026/27. Borrowing costs could also rise if inflationary pressures persist, adding further pressure to farm businesses.
The opportunity, as always, is to lean into what New Zealand dairy does best: strong pasture-based performance, financial discipline, and good planning.
DairyNZ has tools and resources available to help farmers test scenarios and sense‑check decisions, and your regional team and trusted advisors are there as a sounding board if you need them.
We’ve come through tough periods before. By staying focused, sharing ideas, looking out for one another and planning ahead, we’ll get through this one too.
Tracy Brown is chair of DairyNZ
