Several factors continue to make for an interesting dairy season wind-down.
February, though a quieter period in the dairy season, was far from uneventful.
New Zealand’s milk production exceeded expectations in January, Global Dairy Trade (GDT) events saw contrasting results, and milk price futures for the 2025/26 season reached NZ$10/kgMS. Meanwhile, national dairy exports increased by 9.6% year on year (YoY) for the month.
New Zealand’s latest milk production data showed significant growth in January, with milksolids output up 5.0% YoY to 211.85 million kg – far surpassing NZX’s forecast of 0.8% growth. This marks the highest January output since 2021 and brings the season-to-date increase to 3.9% YoY. On a tonnage basis, production rose by 2.6% YoY to 2.39 million tonnes, 0.6% above the five-year average.
Milk production in other key dairy regions showed mixed results. Argentina and Uruguay reported YoY growth in January, up 5.6% and 2.2%, YoY respectively. The United States and Europe’s latest reports have been pretty flat. The US saw only marginal YoY growth of 0.1% in their reported January milk production and Europe 0.3% for December. Meanwhile Australia reported a -1.0% YoY decline for the same month.
However, the momentum softened at Event 374, where the price index dipped by -0.6%, primarily due to SMP falling -2.5%. Despite this, butter rose 2.2%, and WMP saw only a slight decline of -0.2%.
These GDT movements, particularly after Event 373, contributed to milk price futures hitting the $10 mark for the first time in the 2025/26 season (MKPU26), while the 2024/25 (MKPU25) contract traded as high as $10.20. This provided farmers with a strong opportunity to secure future pricing.
For those looking to manage price risk, the NZX dairy derivatives team, in collaboration with SGX Commodities, Fonterra’s Farm Source and Rabobank, will be offering free milk price hedging workshops across New Zealand in March and May.
New Zealand’s strong dairy export performance was evident in January’s trade data. Total dairy exports rose 9.6% YoY to 386,420 tonnes, with export value surging by 29.6% to US$1.63 billion – the highest monthly total since December 2022. High commodity prices for milk powders and milk fats were key drivers of this increase. With the exception of anhydrous milk fat (AMF) and buttermilk powder (BMP), all major dairy product categories saw export growth.
China, New Zealand’s largest dairy export market, reported a 17.3% increase in total dairy imports for December, with the value of imports rising 31.2% YoY. This was largely driven by SMP imports, which climbed 42%, and butter, up 39%.
Among other major dairy-exporting regions, Australia was the only one to report growth, with December exports rising 27.7% YoY. The US recorded a -1.2% decline in December, while Europe’s exports fell -6.0%, and Argentina’s January exports dropped -17.4% YoY.
New Zealand continues to see strong dairy demand from key markets in southeast Asia and the Middle East. However, the recent resurgence in Chinese buying has been instrumental in maintaining price momentum.
As the season winds down, attention will turn to whether demand remains steady through to the start of the new season. China’s appetite for dairy products, particularly powders, has helped sustain the market, but demand is expected to ease as stock levels build.
Additionally, factors such as China’s internal economic conditions, domestic milk production trends, and the impact of new US tariffs will play a crucial role in shaping market dynamics over the coming months.
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