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.
The overnight Global Dairy Trade (GDT) auction saw the price index fall 4.3% compared to the previous auction. Flagship whole milk powder price slumped 5.3% to US$3809/metric tonne – a drop of US$227. The last major slump in WMP prices was two years – from US$3100/MT to US$2548/MT over two auctions.
Price drops were also recorded for skim milk powder (SMP) – which fell 5.8% to US$2620/MT.
Butter and anhydrous milkfat (AMF) also weakened, though to a lesser extent with their -2.5% and -2.6% drops respectively. By contrast, Cheddar’s gain helped cushion the broader downturn, though it was not enough to prevent the overall index registering its largest fall since the -4.1% drop seen in July and the -6.9% drop seen in July last year.
NZX head of dairy insights Cristina Alvarado says regional demand dynamics were central to the outcome. North Asia accounted for half of total purchases, lifting its share
from 34% last event and providing the main support to volumes.
Other regions scaled back, with Southeast Asia/Oceania’s share falling to 26% (from 35%) and the Middle East retreating to 10% (from 14%).
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“This rebalancing of demand compounded the downward price pressure across key commodities,” says Alvarado.
She says the results also highlight the weight of supply in the market. Record New Zealand collections in the opening months of the 2025/26 season have combined with strong output growth from the United States (+3.4% year on year in July), Argentina (+7.7%), and Uruguay (+3.0%). European Union production also returned to modest growth in May (+0.2%), leaving Australia as the only major exporter in contraction (-4.0% in July).
“Exports of WMP and fats have been plentiful, reinforcing the sense of well-covered supply. Forward signals had pointed to weakness, with futures markets implying WMP down -4.7% and SMP largely steady. Instead, both fell more heavily, underlining that the fundamental backdrop of expanding supply and softer demand is now exerting greater
pressure.
“Overall, the latest GDT event underscores the challenge facing dairy markets: strong production and ample export availability meeting increasingly tested demand,” says Alvarado.
