Buyers Push Dairy Prices Higher as GDT Index Jumps 24%
Buyers trying to secure supply are keeping dairy prices at elevated levels.
They had been faced with a declining farmgate milk price: Fonterra started the season with a $10/kgMS mid-point, only to shave a $1 off the mid-point by December last year.
With the GDT price index rising almost 15% in the first three auctions of the year, economists are now talking about a $9.50 milk price or even higher.
As Federated Farmers Waikato dairy chair Matthew Zonderop says, farmers are over the moon with the state of play. Some farmers in the Waikato are still making silage thanks to a milder summer and bouts of heavy rain over the past six weeks.
Zonderop expects most farmers to continue milking way past their traditional drying off mark.
The scale of the price rises this year has exceeded market expectations and has somewhat puzzled economists.
There has been no shift in global milk production. Key exporting countries are still pumping out milk.
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It is likely the surge in milk prices reflect a combination of seasonally tightening supply from New Zealand, concentrated regional demand, and constrained availability across several key commodities, rather than a sudden shift in global milk production trends.
One economist believes market participants and observers may have simply overreacted to the surge in milk production in late 2025.
This is great news for NZ dairy farmers.
With most of the season's production processed and contracted for sale, any movement in GDT prices are unlikely to have a major impact.
After receiving $10.16/kgMS as the final milk price last season, another payout over $9.50 would be a major boost, not only to the dairy sector but also the thousands of rural service providers and contractors.
