NZ Milk Price Could Hit $10/kgMS as Global Supply Eases
A 'tsunami' of milk from key exporting countries is winding down and this may be good news for New Zealand dairy farmers.
That’s according to Rabobank’s Agri Commodity Outlook 2026 report. It describes a world where agricultural commodity exports have become “pawns on a geopolitical chessboard” between two spheres of influence - China and the United States - that both serve as crucial export destinations for New Zealand.
With trade wars reshaping long-standing production and exporting patterns, Rabobank head of agri commodity markets research Carlos Mera said that agriculture was now playing by geopolitical as well as supply-and-demand rules.
“[For example] before the Trump-Xi agreement, Brazil’s soy export prices benefitted from strong Chinese demand while US prices were heavily depressed. Since the announcement of the agreement US and Brazil soybean prices have come closer together, but given that we still see a lot of trade barriers ahead, more price differences are likely.
“Farmers, traders, and policymakers must prepare for a world where trade is disrupted, regional prices fluctuate and the unexpected is now the baseline. Geopolitical fragmentation and government intervention has redefined global agriculture.”
Initial trade conflicts that began with tariffs have evolved into a global subsidy race with governments intensifying agricultural support programmes through direct payments, minimum price guarantees and biofuel mandates.
General manager for RaboResearch New Zealand and Australia Stefan Vogel said this widespread protection has muted the reaction of farmers to low prices.
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“New Zealand’s trade with the US and China is going strong, benefiting farmgate prices. New Zealand will be hoping to fly largely under the geopolitical radar again in 2026.”
Despite trade tension, global growth in 2025 exceeded expectations supported by monetary easing, lower energy prices and frontloading of exports ahead of tariff hikes.
However, these mitigating factors will fade, with the negative effects of tariffs and uncertainty (such as widening price gaps between producing nations) likely to surface in 2026.
Rabobank forecasts global GDP growth at 2.9% in 2025, easing to 2.7% in 2026. While trade between major blocs will likely slow, intraregional trade could rise due to diversion. Inflationary pressures are expected to persist in some regions but will likely be less severe than previously projected.
Meanwhile, the tariff war’s unintended effects are still being corrected, with US authorities reviewing tariffs on products the country does not produce – like coffee and cocoa – which could ease costs for US consumers and restore trade flows from producing nations.
Milk production in most key global dairyexporting regions is growing with a velocity outperforming RaboResearch’s previous expectations. These gains are expected to maintain momentum into 2026, though the pace will moderate.
