Editorial: Punching Above Our Weight
OPINION: With 10,500 dairy farms, New Zealand continues to punch above its weight around the world.
Last week, the co-operative announced an opening 2026/27 season forecast farmgate milk price of $9.75/kgMS - within a range of $8 to $11/kgMS.
The co-op also retained a midpoint price of $9.70/kgMS for the season which ended Sunday, May 31.
The forecast milk price for the season just ended remains at $9.70/kgMS.
In the previous season, Fonterra farmers received a record $10.16/kgMS.
Strong Milk Production And Global Demand Supporting Forecast
New chief executive Richard Allen says milk production is up considerably, and despite disruption in global supply chains, its sales book is well contracted, and shipping volumes are strong, with the highest third quarter shipment volumes in a decade.
"As we look ahead to next season, we expect milk collections to remain high, in line with this season.
"Our in-market sales teams are anticipating solid demand from across the regions despite potential volatility, and this is reflected in our opening forecast range."
Dairy Farmers Welcome Positive Forecast
Waikato Federated Farmers dairy chair Matthew Zonderop says the opening forecast is fantastic news for farmers.
However, he adds that inflation on farm remains a concern.
"Fuel and fertiliser will be the ones to watch as those are the ones we can do without," he told Rural News.
He notes that average farm working expenses is around $8.50/kgMS and if costs continue to rise, margins will diminish.
"Here's hoping that supply and demand remains and we hit the $10.75/kgMS ceiling."
Geopolitical Risks Creating Cost Inflation
RaboResearch senior analyst Emma Higgins warns that the inflationary impacts of geopolitical disruption are likely to squeeze farmer margins in the new season, making disciplined cost control and scenario planning essential.
"While the 2026/27 dairy season is expected to be another profitable," Higgins sasy.
"New Zealand dairy farmers will start the new season on 1 June facing a marked squeeze on margins, driven by persistent and broad-based cost inflation.
“The ongoing closure of the Strait of Hormuz - now approaching its fourth month - is creating conditions reminiscent of past stagflationary shocks. Initial impacts, particularly higher energy prices, are now flowing through into key upstream dairy inputs, including diesel, fertiliser, and industrial goods.”
