Fonterra lowers milk price forecast amid softer demand

Fonterra has lowered its 2026/27 milk price forecast amid declining prices at recent Global Dairy Trade (GDT) auctions.

The co-op said the revised new season farmgate milk price forecast was $9.25/kg of milk solids, with a new range of $8-$10.50/kg.

It was down from the opening forecast of $9.75/kg announced in May, with a wide range of $8-$11/kg.

The 2025/26 forecast of $9.60-$9.80/kg, with a mid-point of $9.70, remains unchanged.

Fonterra chief executive Richard Allen said the change for the new season reflected softer-than-expected demand amid strong supply.

"GDT prices have fallen 11 percent across the reference products that inform the farmgate milk price since we announced the opening forecast in late May, while milk production from key exporting regions is up on last year.".

The most recent GDT auction saw the price index fall 4.9 percent, with wholemilk powder down 4.4 percent.

"We're expecting a strong start to the season in New Zealand, noting the potential for the El Niño weather pattern to impact global supply as the season progresses," Allen said.

He noted it was still "very early days".

Allen said the co-op continued to focus on maximising returns for farmer shareholders.

"As the seasonal supply picks up, our plan will ensure we utilise our flexible operations footprint, strong customer relationships and robust supply chain to shift milk into the products and markets where we can get the best returns for our farmers' milk."

Wairarapa dairy farmer John Stevenson said the lower milk price forecast would not have surprised most farmers, after consecutive and significant price drops at the Global Dairy Trade auctions.

"We've certainly seen the last two Global Dairy Trade events fall off, and whilst we never like to see a decline in forecast farmgate milk price, it is early in the season and Fonterra has clearly reacted to what they're seeing in the market.

"We hope we'll see it come back up again."

Stevenson said most farmers' breakeven milk prices sat at the high $8 per kg of milk solids mark, though farm input costs continued to rise.

"With this recent reduction in farmgate milk price, those margins become a bit slimmer and we as farmers wouldn't want to be seeing that that drop any further, otherwise it'll put real pressure on our businesses."

There was an oversupply of milk in the global market at present, driven by increased production out of the United States and Germany, according to Rabobank's latest Agribusiness report for June.

The report said heatwaves in Europe may affect its production, with France's dipping after a strong start and Ireland behind year-on-year levels.

Looking ahead to the new milk season here, Stevenson said New Zealand's milk production could also be reduced by the forecast El Niño weather pattern.

"Fonterra will react similarly if they see demand go up from a reduced supply globally, and even looking forward you know, if a super El Niño appears here then that would no doubt impact our production domestically."