Westpac picks $10.30/kg milk price for current season

Fonterra is New Zealand's biggest business.

Westpac has upped its farmgate milk price forecast for the current season by 30c to $10.30/kg.

The bank’s opening forecast for the 2025/26 season is $10/kg.

Fonterra’s forecast range for the current season is $9.50/kg- $10.50/kg, with a $10/kg mid-point.

A $10/kg milk price would be a record if it comes to pass.

Westpac said global dairy prices have generally held their ground, and the lower New Zealand dollar was helping to boost local returns.

The last two GlobalDairyTrade auctions have seen a solid lift in dairy prices, although that followed declines in the two previous auctions, the bank said.

“Overall, though, they’ve held up better than we expected – our previous $10/kg forecast assumed that prices would gradually edge down over the remainder of the season,“ the bank’s economists said.

“Chinese buyers have been much more prominent in recent months, with reports that they are needing to restock after letting their inventories run down to extremely low levels.”

Whole milk powder (WMP) - which has the biggest bearing on Fonterra’s milk price - had been particularly in demand, as there were few countries other than New Zealand that export it in significant amounts.

The bank noted that WMP prices have reached their highest since April 2022.

Other products such as skim milk powder and butter have also gained recently but have not exceeded last year’s highs.

Commenting on its opening forecast for 2025/26, Westpac said: “While we expect world prices to ease from their current levels as the rebuilding of Chinese inventories runs its course, this is partly offset by a sustained lower exchange rate over the season.”

The bank’s season-ahead forecast is in line with futures market pricing.

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