NZX Futures Support $10 Milk Price for 2026 Season Amid Strong Global Demand

The New Zealand dairy industry is poised for another strong season, with NZX futures market pricing remaining firmly supportive of a $10 per kg/milksolids farmgate milk price for the 2026 season. This comes at a time when global demand, especially from China, continues to drive up dairy prices and provide a stable outlook for farmers.

With domestic production set to increase significantly in August, the season is expected to reach its peak in October and continue into January. Early signs of a strong start to the season have already been evident, with Fonterra's confirmed milk price for the previous season standing at $10/kg, and the mid-point for the current season also hitting the same mark.

Economists note that it is rare to see two consecutive high milk price seasons, but if this scenario unfolds, it could boost the dairy sector's contribution to the New Zealand economy by around $10 billion over two years compared to previous, more moderate outcomes of around $8.50/kg.

"It’s very strong at the moment if you are a dairy farmer in New Zealand, with milk price futures sitting at $10/kg," said James Atkinson, NZX derivatives sales manager. "A lot of dairy farmers - if not all - will be making a profit at that level, so that’s a really good sign."

The upward trend in milk price futures is being driven by strong global demand, particularly for whole milk powder and skim milk powder. Indications from smaller "pulse" auctions suggest that prices could rise further at the next auction on August 6. Despite increased volumes coming online in New Zealand and the US, global prices have remained historically high, supported by strong demand and a steady New Zealand dollar.

"Overall, demand has been pretty sticky and robust over a period of time when volumes are increasing in New Zealand," Atkinson said. "There is a lot more volume coming on going into spring, and Fonterra is putting volume on the GDT platform, but prices are managing to stay at historically high levels."

NZX's head of dairy, Cristina Alvarado, highlighted that global production trends are favorable for New Zealand, with key dairy-producing countries like Germany and France struggling, while New Zealand's production has been strong. However, uncertainty remains in the US market due to trade tariffs. In China, domestic dairy production is declining, but demand has stayed steady, further supporting New Zealand's exports.

Looking ahead, NZX futures for the 2027 season point to $9.50/kg. ANZ's latest agri report noted that good pasture growth over winter has ensured no shortage of feed, and a surge in imports of feed supplements like palm kernel expeller has provided additional support. Last season's milk production rose by 3%, the largest year-on-year gain since 2014-15.

"It is hard to make large gains two years in a row, but, with the stars aligning, growth of 1-3% should be attainable in 2025-26 if the weather cooperates," the report said.

As the dairy sector continues to benefit from strong global demand and favorable local conditions, the outlook for farmers and the broader economy remains optimistic. With prices at such a high level, the industry is in a prime position to contribute significantly to New Zealand's economic growth in the coming years.