Fonterra expects to pay dairy farmers more than ever for their product this year, but the cockies’ good fortune is likely to bring higher prices for consumers.
Here’s how and why that happens, by the numbers.
$9.50 to $10.50
Fonterra’s latest forecast farmgate milk price ‒ the amount it pays farmers ‒ is between $9.50 and $10.50 per kilogram of milk solids.
24
Even if the final figure comes in at the lower end of that range, it will still be the highest payout in the co-op’s 24-year history (the most recent high was $9.30 in 2021/22) and significantly more than last season’s payout of $7.83/kgMS.
$1.8m
Let’s shoot for the midpoint and assume a final farmgate milk price of $10/kgMS.
At that amount, a farmer with 448 cows (the average herd size last season) would be paid about $1.8 million for their product this season.
Great news if you’re a farmer, but what about the rest of us?
$X
Unfortunately for consumers, retail prices for dairy products are likely to rise.
While a higher farmgate milk price shouldn’t directly raise the price of dairy products in the supermarket, both are influenced by the price received for dairy goods on the international stage.
That has been rising for the past year or so, and not lifting domestic prices to match wouldn’t be good business.
“If Fonterra, or any other producer, can get $X for their dairy product internationally, and less than $X for a product domestically, they would sell all their product internationally all the time,” Infometrics chief executive Brad Olsen previously told Stuff.
“Although we produce a lot of dairy here, prices won’t necessarily be cheaper – what farmer wants to deliberately take a lower profit for doing their work when they could get more internationally? So instead, domestic prices have to at least trend with international prices.”
$4.25
And you can already see those international forces at play in domestic retail prices.
According to Stats NZ, the price for a two-litre bottle of milk was $3.84 in December 2023 and $4.25 in December 2024.
A 1kg block of mild cheddar had increased in price from $10.12 to $11.01, and 500g of butter had risen to $6.66 from $4.48.
The price of a six pack of yoghurt was $7.69 which, although down from $7.74 the year prior, was still the highest price in the past eleven months.
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