Milk Glut Drags Fonterra Forecast Down to $9.20/kgMS
A milk glut around the world shows no sign of easing, putting downward pressure on farmgate milk prices for the next few months.
Despite the upheaval in the Middle East, dairy prices recorded big jumps last week. Whole milk powder prices rose 4.5% while skim milk powder rose a whopping 9.1%.
The Global Dairy Trade price index has risen around 24% in the first five auctions of this year.
ASB senior economist Chris Tennent-Brown told Rural News that they are surprised by the strength of the recovery in prices this year, given the strong production growth here and abroad.
"SMP price gains have been particularly impressive," he says.
"In response to the lift in prices we had already lifted ASB's Fonterra milk price forecast from $9.20/kgMS to $9.50.
"We're even more confident in that number now."
Read More:
- Market Takes The Scenic Route
- Editorial: A Win-Win For All
- Global Dairy Prices Surge with GDT Index Up 18% in 2026
Tennent-Brown says buyers wanting to secure supply remains key.
He says the US-Israel war with Iran can add to buyers' desire to secure supply.
NZX head of dairy insights Cristina Alvarado says the strength of the last GDT auction result reflected not just positive sentiment, but clear and immediate product need.
She says the price action occurred despite expanding milk production across major exporting regions, underscoring that headline supply growth is not translating into comfortable powder availability. Chinese stocks remain at relatively lower levels, and bidding demand showed strong competition.
“Buyers were clearly prepared to extend beyond futures signals to secure near-term fat coverage.”
Tennent-Brown expects prices to ease slightly in the coming months.
“We have factored some easing in prices over the latter part of the season into our $9.50/kgMS pick, but so far this hasn’t materialised.
“There are plenty of moving parts between now and the end of the season, but from a milk price perspective, things look a lot better than at the end of 2025.”
There are also signs that supply situation may be changing.
 |
|---|
|
There are also signs that supply situation may be changing. |
Alvarado says New Zealand’s milk production curve is now firmly in seasonal decline, and forward offer volumes through March to May indicate further easing.
“At the same time, growing domestic protein demand in the United States and new cheese capacity not yet operating at full utilisation are absorbing milk locally.
“The last GDT event therefore demonstrated that even in a globally expanding production environment, prompt availability – particularly in powders and fats – remains sufficiently tight to drive assertive price responses when buyers step forward.”
