Domestic price of milk

IBISWorld forecasts the domestic price of milk to push up by 0.7% in 2025-26, reaching 118.5 index points. With more than 95% of New Zealand's milk exported, according to the Dairy Companies Association of New Zealand, domestic prices are largely dictated by global markets rather than local consumption. In 2025, sluggish demand growth in China and other Asian economies has weighed on Global Dairy Trade (GDT) auction results, with the FAO's dairy price index also easing through mid-2025. These developments have produced only a marginal gain in New Zealand's domestic milk price index this year.

The current stabilisation follows a volatile period. Pandemic-era disruptions from 2020 to 2022 pushed freight costs to record highs and lifted feed and fertiliser prices, straining profitability for producers and inflating consumer prices. Adverse weather compounded these pressures, leading to reduced milk production across New Zealand and other exporters like the EU and the United States. These conditions contributed to the sharp rise in domestic prices in 2021-22 and maintained elevated levels through 2022-23, before easing as supply chains recovered.

Export dynamics have continued to reinforce local pricing trends. While recent Chinese demand has softened, income growth in South-East Asia has supported consumption of processed dairy, maintaining strong export volumes overall. The New Zealand dollar weakened through the first half of 2025 as the Reserve Bank cut rates, improving exporter returns and limiting downwards price adjustments domestically. Farmgate signals have reflected similar dynamics, with Fonterra opening its 2025-26 payout range at a relatively high level, reinforcing that global markets remain supportive despite short-term demand softness. Overall, IBISWorld estimates the domestic milk price index to increase at a compound annual rate of 3.5% over the five years through 2025-26.