Steel said that looking ahead, above average inflation-adjusted prices “raise the chance of a global supply response, tempering prices”.

“This may be underway in the likes of the US. There are questions around how much of any additional milk will make it into world markets given trade environment uncertainty and, if it does, at what price?”

Steel said the BNZ economists’ forecast for the 2025/26 season [the one that’s just started this month] remains at $9.50.

“The small decline from $10 in 2024/25 is a nod to the current uncertainty around the global economic outlook.”

Steel noted that the Fonterra forecast range of $8.00 to $11.00 for the new season is “very wide”.

“That is the widest range ever provided and a sign of the times.”

The very wide range reflects “considerable uncertainty” around the outlook, with Fonterra acknowledging ‘ongoing geopolitical uncertainty and the potential for a wider series of outcomes across the season.’

Steel also commented generally on the strong primary product prices currently being seen.

“Price gains have been instrumental in generating significant increases in overall export returns and rural incomes. In the first four months of 2025, total goods export values were 20% higher than a year ago. This was driven by a 26% expansion in agricultural exports. Very positive,” he said.

Steel said the past year’s price gain for lamb, beef, and dairy sees the price level for each of the three products above their respective five-year average.

“The degree varies by product, but all are substantially above recent averages: lamb by 23%, beef by 39%, and dairy by 25%.”

While these prices are “positive”, costs are higher too.

“We need to account for inflation to get a better perspective of where things sit in real (inflation-adjusted) terms. The table summarises current season average prices along with where it sits relative to history in both nominal and inflation adjusted terms.”