Summary
27 October 2026 – Expectations are growing that the farmgate milk price could reach $10/kgMS this season as milk powder prices surge and the New Zealand dollar weakens. ANZ agricultural economist Matt Dilly said a $10 milk price is 'very possible' because the NZ dollar has continued to weaken and skim milk powder prices have risen further since the bank released its forecast a month ago. BNZ has lifted its forecast for the season to $10/kgMS; NZX milk price futures for the 2026-27 season have exceeded $10.30/kgMS; Fonterra's forecast midpoint is $9.50, with a range of $8.50 to $10.50; ANZ continues to forecast $9.80.
BNZ senior economist Doug Steel said the NZ dollar has fallen about 5 percent against the US dollar, while skim milk powder prices in the Global Dairy Trade auction have risen more than 20 percent to near US$4,000 a tonne, about US$200 above whole milk powder. However, Waikato Federated Farmers dairy section chair Matthew Zonderop cautioned that a $10 milk price may look good on paper but does not necessarily mean more money in farmers' pockets: parts of Waikato have received only 77mm of rain this month, compared with 184mm a year earlier, and a drought would force more supplementary feed purchases. Dilly said milk solids collection rose 1.9 percent year on year in September and is up 3.0 percent so far this season, with October the peak milk month and positive momentum likely to continue at least through November or December; El Niño may not begin affecting milk production until early 2027, by which time most of the season's milk will have been produced and sold.
He also said that as long as oil prices remain high, skim milk powder prices are likely to keep rising, while butter and milkfat prices continue to ease on strong European and US production.
Commentary
As New Zealand's largest dairy co-operative, Fonterra's milk price forecast directly affects cash flow on about 11,000 dairy farms nationwide. Skim milk powder prices are currently near US$4,000 a tonne, a premium of about US$200 over whole milk powder – a rare inversion that reflects strong global demand for high-protein dairy ingredients, particularly in sports nutrition and infant formula. A 5 percent fall in the NZ dollar against the US dollar further amplifies export returns, but small and medium-sized business owners should note that strong milk prices often come with higher input costs – rainfall in Waikato this month is only 42 percent of the same period last year, and drought risk could push up feed prices and squeeze actual margins.
Globally, strong milk production in Europe and the US is keeping butter and milkfat prices under pressure, meaning processors reliant on milkfat products may face narrower margins, while those focused on skim milk powder or high-protein products are well positioned. NZX futures have priced $10.30/kgMS, signalling market optimism, but if El Niño affects milk production in early 2027, supply tightness could intensify. For New Zealand SMEs, the key indicators to watch are Fonterra's next-season milk price range adjustment and the spread between skim milk powder and whole milk powder in Global Dairy Trade auctions, which will be critical in judging the durability of demand for high-protein dairy ingredients.
Keywords: milk price, skim milk powder, New Zealand dollar, Fonterra, milk solids, El Niño, drought, Global Dairy Trade
Photo by Couleur on Pixabay
Source: Rural News Group
Disclaimer: This article is compiled from publicly available sources for general information only. The analysis and commentary are editorial opinions. MiDeer Observer does not guarantee the accuracy or completeness of the information provided. Readers should seek independent professional advice before relying on this content, or contact us for more information.
