Rising confidence: Whole milk powder tops US$4000/tonne in August, signals strong dairy season

The thick end of the dairy season has started strongly.

Whole milk powder prices have broken through US$4000/tonne for the first time in an August month since 2013, according to NZX Dairy data.

Farmers can take confidence from this morning’s auction, which registered a 0.7% increase on the GDT Price Index, especially against the background of already strong milk production and the extra volume put on the platform by dairy giant Fonterra.

August is when milk production steps up significantly, en route to the seasonal peak months of September through to January.

Whole milk powder – which has the biggest influence over Fonterra’s farmgate milk price – rose by an average 2.1% to US$4012 a tonne at this morning’s auction.

Skim milk powder, which ranks second, firmed in price by 0.4% to US$2805/tonne.

Matt Bolger, managing director co-operative affairs at Fonterra, said it had been a great start to the season.

“We’re seeing strong demand across China, Southeast Asia and the Middle East,“ Bolger said.

“It’s good to see the momentum from last season continuing,” he said.

But Bolger cautioned: “We still expect plenty of volatility with strong supply in New Zealand and impact of tariffs yet to play through.”

Consumers can breathe a sigh of relief with a 3.8% decline in butter prices to US$7214/tonne, and well down from its early May peak of US$7992/tonne.

However, price changes on the GDT platform typically take several weeks to filter down to the retail market.

Butter milk powder – another Fonterra reference product – fell 2% to US$3050/tonne at the auction.

Anhydrous milk fat – used in chocolate production – gained 1.2% to US$7081 a tonne.

Dairy giant Fonterra’s still-to-be-confirmed milk price for the season just past was $10 per kilo of milksolids (kgMS).

The mid-point for the current 2026 season also stands at $10/kgMS.

Economists say it is rare to see two consecutive high-milk-price seasons.

Rabobank dairy analyst Emma Higgins said the auction was a positive sign for the rest of 2025-26.

“I do think $10 [per kilo] is looking pretty good right now,” Higgins said on NZME’s The Country radio show, although with a caveat.

“I think the big one is really how the market will respond over the next several weeks when we’re coming into critical timing for milk production.”

“How all of that aligns with potentially bumper spring milk production will be critical as to how that $10 price point moves.”

For June, production in terms of milksolids was up 17.8% on the year-ago month.

If back-to-back $10/kgMS seasons pan out, then dairy’s contribution to the economy would increase by about $10 billion over two years, compared to previous, more moderate milk price outcomes of around $8.50/kgMS, DairyNZ estimates.

A low New Zealand dollar – trading today at US59c – is further supporting prices.

ANZ’s latest agri report said good pasture growth over winter meant there was no shortage of feed.

The bank said a surge in imports of the feed supplement, palm kernel expeller (up 34% in the past year) should provide extra support.

Last season’s milk production was up 3%, the largest year-on-year gain since 2014-15.

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