Will milk prices hit $8+ in 2025? Analysts predict a promising season for dairy farmers. Discover the factors driving this optimistic forecast and what it means for you.
Exciting times are ahead for dairy farmers as analysts and models align their optimistic forecasts for the 2025 season’s farmgate milk price. It’s comforting to hear that predictions are hovering above the $8 mark, providing some much-needed stability and confidence in an often-volatile market. Models refined over time, taking into account factors such as supply and demand, weather forecasts, and historical patterns, bolster this positive outlook. As
Kelly Eckhold, Westpac senior economist, puts it, “The current season will end on $7.90 and the new season will begin 50c higher, on $8.40.”
Milk Price Optimism for New Dairy Season
Dairy market analysts have reached a consensus on their forecasts, projecting a range between $8.35 to $8.50. This optimistic projection should encourage you, as four economists from major banks alongside the SGX-NZX Dairy Insights team’s computer model have arrived at these figures.
Analysts and Models Alike Have Good News for Sector’s Farmers
Fonterra is expected to release its initial conservative forecast range on May 30, estimated to be between $7.30 and $8.50, with a midpoint of $7.90. This sets the stage for advance pricing, which will commence on June 1. The recent recovery in Global Dairy Trade (GDT) prices during April and May has solidified a strong foundation for the new dairy season.
“Based on the prices paid in the May 7 GDT for forward deliveries, the farm gate ‘spot’ milk price was $9.25,” noted an industry expert. This figure contrasts with the NZX milk price model’s $8.42.
Different forecasters utilize their own models, incorporating supply and demand factors, weather forecasts, forward prices, foreign exchange rates, and historical patterns. For instance:
- ANZ: $8.50
- ASB: $8.35
- Rabobank: $8.40
- Westpac: $8.40
These models have become more refined over time, benefiting from the relatively stable milk production across major exporters such as Europe, the U.S., and New Zealand.
Steady Milk Futures Prices
The milk futures prices on the SGX-NZX dairy derivatives market have stabilized over the past seven months. The outlook is enhanced by current trends and favorable environmental regulations affecting countries like the Netherlands and Ireland.
ANZ agricultural economist Susan Kilsby pointed out, “The U.S. still has the potential to ramp up milk production, but the European Union‘s output is no longer boosted by quotas.” The main producing regions have adjusted to environmental constraints, influencing supply.
Despite higher input costs such as fuel, fertilizer, insurance, and interest rates, NZ farmers are hopeful. With a break-even figure of $7.75 for both the 2024 and 2025 seasons, you’re on a path to profitability. ANZ also anticipates a gradual increase in the NZ dollar against the US dollar, projected to reach US63c by year-end.
Rabobank’s senior agricultural analyst, Emma Higgins, adds, “Low profitability has reduced dairy herds in the U.S. and South America, while Europe has faced bad weather.” This limited global supply growth supports the market recovery and better prices for producers worldwide.
Sustained Prices & Positive Outlook
ASB senior economist Chris Tennent-Brown indicated that the stable balance of supply and demand should sustain reasonable price support, keeping farmgate milk prices above their 10-year average of $7. Tennent-Brown also predicts that the 2024 milk price will end in the upper half of Fonterra’s forecast range, between $7.70 and $8.10.
Similarly, Westpac senior economist Kelly Eckhold expects the new season to start 50c higher at $8.40, compared to the current $7.90. “Futures and auction prices have been variable. However, there could be some upside creeping into our forecast should recent GDT auction prices and exchange rate trends be sustained,” Eckhold explained.
SGX-NZX milk price futures contracts for the 2025 and 2026 seasons have dipped slightly since January. However, the positive outcome of the May 7 GDT auction, where milk powder prices exceeded expectations, keeps the sentiment buoyant.
As always, analysts will calibrate their forecasts based on Fonterra’s informed but broad range, expected on May 30.
Key Takeaways:
- Analysts predict farmgate milk prices for the 2025 season to exceed $8, giving dairy farmers a positive outlook.
- Fonterra’s first forecast range, expected on May 30, is anticipated to be between $7.30 and $8.50.
- Recent recovery in Global Dairy Trade prices has reinforced the starting point for the new dairy season.
- Models from ANZ, ASB, Rabobank, and Westpac project milk prices between $8.35 and $8.50.
- Global milk supply growth remains constrained, providing a stable environment for price improvements.
- Higher input costs are a challenge for NZ farmers, with a break-even point pegged at $7.75 for upcoming seasons.
- Strong supply and demand balance is expected to maintain farmgate milk prices above the 10-year average of $7.
