MPI’s Diana Reaich: Building global trade relationships
Relationships are key to opening new trading opportunities and dealing with some of the rules that countries impose that impede the free flow of trade.
It says global dairy prices are likely to increase and farm expenses will stay static and it's predicting that dairy farmers will on average receive a record $10/kgMS farmgate milk price.
This comes on top of what the Director General of MPI, Ray Smith, is describing as a blockbuster year for the primary sector with dairy exports for the year ended June set to reach $27 billion - up 16% on the previous year. This is due, he says, to strengthening demands among traditional dairy importing countries such as China and a slight weakening in global supply.
Overall, primary export returns for the year are close on a record $60 billion and this is due mainly to the performance of the dairy industry. What's more, dairy exports are expected to hit $30 billion by 2029. For dairy, it's been an amazing turnaround, says Smith.
"These global dairy prices have been well above the long-term averages and that's driven a lot of the value," he told Dairy News.
"Full cream related products - cheese and so on - have been fetching incredible prices because in Europe and the US there's beena bit of decline in production. In China, very good prices have been achieved in the food service sector, especially with high value products such as cream and butter doing particularly well. There has even been a pickup of infant formula sales there," he says.
Smith says a combination of global factors have worked in NZ's favour. The exchange rate is one, but a significant factor is the decline of milk production in China and in the US where avian influenza has gone through their cattle herd.
He says in Europe an outbreak of foot and mouth disease in Hungary has affected production and volumes have also been down in Argentina.
Smith says overall on the home front it's been a bumper season and NZ has got through the droughts reasonably well - producing more milk. He says the good spring and summer were key factors and grass growth has been good, with a lot of feed stored.
"To me, what is phenomenal is that there's been a two percent productivity growth in dairy farming alone, which is quite an achievement," he says.
'Amazing Year'
The MPI outlook report paints a picture of an amazing year for the dairy sector.
It notes that on 6 May 2025, Global Dairy Trade (GDT) prices were 18% more than they were a year ago. Figures for some of the individual products, show that the average whole milk price was up 20%, AMF 27% and butter 25%. The report goes on to point out that against their five-year average, butter was up 42% and AMF 31%. SMP prices, while better, are however still below their five-year average.
Back on the farm in NZ, MPI is forecasting a modest 2.2% increase in milk production to the end of June and just a 1% increase for the coming season. Droughts and the early drying off cows in some regions have put something of a handbrake on production.
Some other good news is the prediction that interest rates are likely to continue their decline into the new season.
While there is cause to celebrate this year, Ray Smith warns there are still headwinds to conquer in the future, with the report showing that growth in the coming years will be incremental - around 2%, not the super 16% of 2025.
"I think there is uncertainty in the environment and outlook, and you can't deny that. Among other things we have yet to see the full effect of tariffs play out across the world," he says.
