Dairy boost: BNZ ups Fonterra’s milk price forecast to $10.25

BNZ expects Fonterra to pay a $10.25/kg milk price this season. Photo/ NZME

Improved demand for dairy has prompted BNZ economists to raise the farmgate milk price it expects Fonterra to pay this season by 75c to $10.25/kg milksolids.

Most bank economists have pitched their forecast at $10/kg, along with Fonterra.

BNZ’s previous milk price forecast of $9.50/kg was built on a dip in Global Dairy Trade (GDT) auction prices and on expectations the New Zealand dollar would have pushed higher by now.

Auction prices fell from a recent peak by a cumulative 7.4% in early May to early July.

“But changing factors like world growth expectations edging higher, weather conditions and disease affecting milk supply in parts of the EU, rising global fertiliser prices, reports of continued milk production weakness in China, and resolution of a trade dispute between NZ and Canada, collectively suggest a stronger dairy outlook than we previously anticipated,” BNZ economist Doug Steel said.

The 0.7% lift at the last GDT auction was arguably stronger than it looked, given prices tended to fall at this time of the season when production volumes increase, Steel said.

He said the focus was now on New Zealand production as the season proper starts to ramp up towards the peak month of October.

The season is already off to a strong start.

After lifting 3% last season, New Zealand production is assumed to lift 2% this season, Steel said.

“Less volume than that would present some upside risk to our milk price view, at the margin, and vice versa if production is stronger,” Steel said.

NZX futures pricing points to a $10.17/kg farmgate milk price for the current 2026 season and $9.60/kg in 2027.

In May, Fonterra set its opening forecast for 2026 at $10/kg, the midpoint of a $8-$11/kg range.

A $10/kg milk price equates to around a $15 billion injection into the New Zealand economy, the co-op estimates.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.