January 6, 2026
Farmers have been reminded to “sharpen their pencils" after a further drop in forecast farmgate milk prices.
Farmers have been reminded to “sharpen their pencils" after a further drop in forecast farmgate milk prices.
Fonterra released its revised milk price of $8.50 - $9.50 per kilogram of milk solids (kgMS) last week after its previous estimation of $9.00-$10.00.
Chief executive Miles Hurrell said there was an abundance of milk globally.
“With half the season still to complete, we continue to experience strong milk flows both in New Zealand and globally, particularly out of the United States and Europe,” he said.
“[This] continues to put downward pressure on global commodity prices.”
High milk volumes combined with “a rising New Zealand dollar” were the main justifications for the milk price drop.
“We remain committed to maximising returns for farmer shareholders through both the Farmgate Milk Price and earnings, strong customer relationships and a firm focus on margins, product mix, and operational efficiencies,” Hurrell said.
Milk production in the European Union has increased by 4.8% over the last three months, according to ANZ’s December Agri Focus report.
The report expects milk production to be up 4% in the United States and a whopping 11% in Argentina by season’s end.
New Zealand is also churning out more milk than usual with a 3.4% to-date increase in production.
This milk price drop comes just a month after Fonterra’s reduction of a $10 midpoint price to a $9.50 midpoint.
ANZ agricultural economist Matt Dilly said the back-to-back announcement will prompt farmers to “sharpen their pencils” and comb through their on-farm spending.
“Folks that were really gearing up for a big season this year, holding onto some extra animals, stocking up on supplementary feed, that will be much less of a theme next year,” Dilly said.
“There might be a bit of extra destocking at the end of this season.”
He said fluctuations in the dairy market are “unfortunately” common and farmers were usually aware of this.
“While milk is produced almost everywhere in the world, very little of it is traded. So small changes in production can have a big impact on pricing.”
He said, milk prices aside, farming was experiencing some stability at the moment.
“In the broader scheme of things, on-farm costs are relatively under control, interest rates are low, so there’s some profitability there.
“At least for those Fonterra farmer shareholders, there’s a $2 payout to look forward to.”
ANZ’s farmgate milk price midpoint has been revised to $8.90/kgMS, a reduction from its previous $9.65/kgMS.
Federated Farmers Mid Canterbury Dairy chairperson Josh Dondertman said this level of change was unusual.
“There is always fluctuation, but it feels like we’ve gone through a peak and hit a bit of a drop, quite quickly,” he said.
“I think everyone’s a little bit more nervous.”
Global Dairy Trade prices have fallen for nine auctions in a row, Dondertman noted, so the fall “shouldn’t come as a surprise” to farmers.
“I think Mid Canterbury’s in an extremely strong place to continue on with business as usual.”
Dondertman encouraged farmers to get off paddock and make time for family and fun during the Christmas season - to rejuvenate for the year ahead.
By Anisha Satya
Farmers have been reminded to “sharpen their pencils" after a further drop in forecast farmgate milk prices.
Fonterra released its revised milk price of $8.50 - $9.50 per kilogram of milk solids (kgMS) last week after its previous estimation of $9.00-$10.00.
Chief executive Miles Hurrell said there was an abundance of milk globally.
“With half the season still to complete, we continue to experience strong milk flows both in New Zealand and globally, particularly out of the United States and Europe,” he said.
“[This] continues to put downward pressure on global commodity prices.”
High milk volumes combined with “a rising New Zealand dollar” were the main justifications for the milk price drop.
“We remain committed to maximising returns for farmer shareholders through both the Farmgate Milk Price and earnings, strong customer relationships and a firm focus on margins, product mix, and operational efficiencies,” Hurrell said.
Milk production in the European Union has increased by 4.8% over the last three months, according to ANZ’s December Agri Focus report.
The report expects milk production to be up 4% in the United States and a whopping 11% in Argentina by season’s end.
New Zealand is also churning out more milk than usual with a 3.4% to-date increase in production.
This milk price drop comes just a month after Fonterra’s reduction of a $10 midpoint price to a $9.50 midpoint.
ANZ agricultural economist Matt Dilly said the back-to-back announcement will prompt farmers to “sharpen their pencils” and comb through their on-farm spending.
“Folks that were really gearing up for a big season this year, holding onto some extra animals, stocking up on supplementary feed, that will be much less of a theme next year,” Dilly said.
“There might be a bit of extra destocking at the end of this season.”
He said fluctuations in the dairy market are “unfortunately” common and farmers were usually aware of this.
“While milk is produced almost everywhere in the world, very little of it is traded. So small changes in production can have a big impact on pricing.”
He said, milk prices aside, farming was experiencing some stability at the moment.
“In the broader scheme of things, on-farm costs are relatively under control, interest rates are low, so there’s some profitability there.
“At least for those Fonterra farmer shareholders, there’s a $2 payout to look forward to.”
ANZ’s farmgate milk price midpoint has been revised to $8.90/kgMS, a reduction from its previous $9.65/kgMS.
Federated Farmers Mid Canterbury Dairy chairperson Josh Dondertman said this level of change was unusual.
“There is always fluctuation, but it feels like we’ve gone through a peak and hit a bit of a drop, quite quickly,” he said.
“I think everyone’s a little bit more nervous.”
Global Dairy Trade prices have fallen for nine auctions in a row, Dondertman noted, so the fall “shouldn’t come as a surprise” to farmers.
“I think Mid Canterbury’s in an extremely strong place to continue on with business as usual.”
Dondertman encouraged farmers to get off paddock and make time for family and fun during the Christmas season - to rejuvenate for the year ahead.
By Anisha Satya
