The final milk price for this season, which finishes at the end of next month, is set to exceed even the most optimistic forecasts offered in recent months.
ANZ agricultural economist Matt Dilly says last week's ceasefire is very welcome news, but it's too early to say how durable it will be.
"Even in the best-case scenario, there will still be ripple effects across markets and it will take some time before things return to normal," Dilly told Dairy News.
The ANZ Bank has lifted its milk price forecast for this season to $9.85/kgMS, 15c above Fonterra's forecast mid-point.
"This forecast is hardly bold; at this stage of the season Fonterra has already locked in most components of their pricing formula," he adds.
But he cautions that demand could emerge as a concern.
Price-sensitive Asian economies are key customers for New Zealand dairy and are among the most impacted by rising fuel costs.
Dilly says that dairy demand may weaken the longer the current situation lasts, especially in markets where dairy products are not traditional staples.
"The drop in last week's Global Dairy Trade (GDT could indicate that importers have rebuilt inventories to their satisfaction, and that the bearish global supply and demand situation will become more relevant in the coming months."
ANZ's price revision comes despite the GDT auction recording its first price fall this year.
Dilly says global dairy prices have had quite a turnaround in 2026 after ending 2025 on the slide. The GDT price index is up 22% since the start of the year.
"Initially, rising geopolitical risk lifted most commodity prices, including dairy," he says.
"Then in late February that risk turned to reality.
"This trend had very little to do with dairy directly, although the bearish end to 2025 led buyers to assume they could patiently wait for prices to fall further.
"The price surge through the end of March shows how quickly that mindset changed, despite prices falling 3.4% at the latest GDT auction."
"For the current 2025/26 season, this means the final milk price will exceed even the most optimistic forecasts offered in recent months."
With Fonterra's full earnings guidance for continuing operations raised from 45-65c/share to 50-65c/share, a full shared up farmer could get over $10.20/kgMS. Last season, Fonterra paid $10.16/kgMS as milk price and a 57 cent fully imputed dividend - one of its highest ever returns to its shareholders.
Fonterra chief executive Miles Hurrell also had a word of caution for farmers.
The revised forecast reflected improvement in global commodity prices and the co-op's strong underlying margins and cost control, but he noted that significant volatility remains, particularly as the conflict in the Middle East continues.
