Fonterra’s historic milk collections and booming exports inject billions, reducing farmer debt to five-year low.
New Zealand’s dairy industry is concluding what can only be described as a truly remarkable season, marking its highest milk production in five years. Fonterra, the nation’s dairy giant, reported impressive milk collections totaling 1.509 billion kilograms of milk solids, representing a substantial 2.6% increase from the previous season. May’s production data alone set a new record, surging by 7.5% to 77 million kg MS, with NZX data further confirming an 8% increase compared to May 2024. This exceptional rebound follows a challenging period, including a severe drought that impacted much of the North Island, showcasing the resilience of New Zealand dairy.
The positive momentum extends beyond production, with dairy export volumes demonstrating a robust 16% increase, reaching an impressive $27 billion. This significant contribution has propelled the primary sector’s forecasted revenue to a record-breaking $59.9 billion by June 30. Looking ahead, projections indicate that the primary sector is set to reach $65.9 billion by 2029, with dairy alone contributing an estimated $30 billion, solidifying its pivotal role in the national economy and highlighting its global agribusiness impact.
The strong performance is having a tangible financial impact on dairy farmers. The current $10/kg MS forecast for the new season is expected to inject approximately $15 billion into the national economy. This surge in income has enabled farmers to significantly reduce their debt levels, which now stand at their lowest point since 2018, totaling around $35 billion. This welcome relief underscores the direct economic benefits flowing from a successful dairy season.
Despite the encouraging financial turnaround and falling interest rates, New Zealand dairy farmers remain acutely aware of ongoing cost pressures. Expenses, particularly for feed, fertilizer, and energy, have seen notable increases. Additionally, higher taxes have contributed to pushing the forecast break-even milk price to $8.68/kg MS. This vigilance on costs reflects a pragmatic approach to dairy economics, even amidst a period of prosperity.
Nevertheless, the projected average payout of $10.21/kg MS comfortably surpasses the break-even point, significantly easing financial stress as farmers prepare for the crucial upcoming calving season. This strong financial position, driven by record production and booming exports, provides a solid foundation for continued investment and sustainability within New Zealand’s dairy sector, allowing farmers to look to the future with renewed confidence after an truly exceptional year.
Source: Farmers Weekly: Closing the books on a remarkable dairy season
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