Analysis Milk
New Zealand milks hard, drought ravages Australia
While New Zealand is experiencing one of its strongest milk seasons ever, the large milk supply is putting price pressure on the global market. Dairy farmers are expanding production due to favorable milk prices, but growth is now backfiring in the form of a surplus. In Australia, on the other hand, dairy farmers are struggling with declining production due to drought and tight feed supplies.
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In September, New Zealand produced 2,67 million tons of milk, the highest level for that month since 2020 and a 2,5% increase compared to last year. Milk protein and fat (milk solids) production grew even faster, by 3,41% to 228.839 tons.
Over the first few months of the season, total milk production reached 13,14 million tons, an increase of 1,6% compared to the previous year. Milk solids production even rose by 2,5% to 1,22 million tons.
High milk price stimulates production
The favorable milk price is maintaining a strong incentive for production. Fonterra maintains its milk price forecast for the 2025/26 season at 10 New Zealand dollars per kilogram of milk solids. This favorable price level is driving farmers to invest further in machinery, barns, and livestock. This strengthens New Zealand's position as a global player in the dairy market, but the growing milk supply could put additional pressure on prices in the short term. Milk prices in New Zealand are likely to decline, just as they have in Europe. The Fonterra milk price is closely linked to the Global Dairy Trade, which has fallen significantly in recent years.
Australia is facing drought and declining production
While New Zealand is experiencing a milk glut, the situation in Australia is the exact opposite. Milk production there fell by 2,99% in August compared to last year, to 661,5 million liters. The state of Victoria—by far the country's largest dairy region—showed a particularly sharp decline of 4,3%. Production also declined in South Australia (-8,2%), New South Wales (-0,1%), and Western Australia (-6,8%). Only Queensland (+3,5%) and Tasmania (+1,1%) recorded slight increases. Cumulatively, Australian milk production this year is down 2,89% compared to last year, at 4,87 billion liters through August.
Drought continues
The ongoing drought in the south of the country is the main cause of the decline in production. At the end of September, soil moisture levels were well below average, while rainfall in the east also remained limited. More rainfall is expected in the east in the coming months, but the drought in the western regions is expected to persist until the end of the year.