{"id":458265,"date":"2026-06-03T04:54:08","date_gmt":"2026-06-03T04:54:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/458265\/"},"modified":"2026-06-03T04:54:08","modified_gmt":"2026-06-03T04:54:08","slug":"nz-dairy-farmers-enjoy-strong-balance-sheets-but-costs-are-mounting-dairynz","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/458265\/","title":{"rendered":"NZ dairy farmers enjoy strong balance sheets but costs are mounting \u2013 DairyNZ"},"content":{"rendered":"
\u201cLooking ahead to 2026-27, it is the rate of increase of expenses that is of most concern,\u201d he said.<\/p>\n
The 2025-26 season finished with a series of records.<\/p>\n
Based on DairyNZ\u2019s production data, national milksolids are set to reach around 2.02 billion kilograms \u2013 the first time New Zealand has passed the two-billion mark, and about 4.5% above last season\u2019s 1.94 billion.<\/p>\n
DairyNZ head of economics, Mark Storey.<\/p>\n
\u201cMany farms enter winter with their strongest balance sheet in recent years with strong production and solid payout,\u201d Storey said.<\/p>\n
The attack by the United States and Israel on Iran on February 28 has driven fuel and fertiliser prices sharply higher.<\/p>\n
Storey said the 2026-27 picture had \u201cshifted materially\u201d since DairyNZ\u2019s March update.<\/p>\n
\u201cThe Strait of Hormuz is no longer a distant watchpoint, it is at the farm gate.<\/p>\n
\u201cFour months in, the disruption is feeding through fuel, fertiliser, feed prices, and freight prices that farmers are seeing right now.\u201d<\/p>\n
In its quarterly update, DairyNZ provided three scenarios to test how different events may affect farm budgets: faster recovery (Strait of Hormuz fully reopens in July), expected recovery (reopens in August) and prolonged disruption (reopens in September).<\/p>\n
Under the expected \u201crecovery\u201d scenario, farms remain profitable, but farm working expenses and the breakeven milk price rise, leaving a smaller operating profit buffer if milk prices were to soften, production slips or seasonal conditions turn dry.<\/p>\n
For the 2026-27 season, DairyNZ\u2019s forecast break-even milk price has risen 36c to $8.79\/kg, with fertiliser, feed, fuel and interest the main factors, while farm working expenses rose to $6.19\/kgMS and operating profit fell to $3.88\/kg.<\/p>\n
Spring will be the pressure point for farmers, Storey said.<\/p>\n
\u201cFertiliser, fuel and supplementary feed decisions all land in the same August to November window, and that is where the cost shock will bite hardest.\u201d<\/p>\n
The duration of geopolitical disruption was a risk.<\/p>\n
Looking back at the past decade, there was a clear pattern of prices remaining high after big events, Storey said.<\/p>\n
\u201cAfter every major inflationary event, the 2022 Russia\u2013Ukraine conflict, the post\u2010Covid supply\u2010chain disruption, feed and fertiliser prices have settled at a stubbornly higher level.<\/p>\n
\u201cThey fluctuate, but they don\u2019t return to their pre\u2010shock baseline.<\/p>\n
\u201cThe longer the disruption persists, the more of today\u2019s elevated cost base becomes the new normal where the breakeven milk price stays near $9.00\/kg into 2027\u201328 under our prolonged disruption scenario,\u201d he said.<\/p>\n
DairyNZ chairwoman Tracy Brown said rising costs reinforced the need to continue to shift the focus on-farm from maximising production to maximising profitable production.<\/p>\n
\u201cThe sector is in a relatively good position; however, regional feedback suggests farmers are planning for elevated costs to persist beyond this season, particularly fertiliser and fuel,\u201d she said.<\/p>\n
A looming El Nino climate pattern may also compound the cost pressure with a feed deficit.<\/p>\n
ANZ raises milk price forecast<\/p>\n
Separately, ANZ raised its farmgate milk price forecast for 2026\/27 to $9.20\/kg from $8.70.<\/p>\n
\u201cThe new season is starting on a positive footing, with good dairy commodity prices and a favourable exchange rate,\u201d the bank said.<\/p>\n
\u201cWe expect dairy prices to weaken over the next few months as the 2026\/27 season ramps up, due to strong milk production in all major exporters.\u201d<\/p>\n
ANZ\u2019s forecast for the season just ended was unchanged at $9.85\/kg.<\/p>\n
At this morning\u2019s Global Dairy Trade auction \u2013 the first for the 2026\/27 season, whole milk powder prices fell to US$3706 ($6250) per tonne, a 2.2% drop compared with the last auction in May.<\/p>\n
The GDT price index dropped 0.6%.<\/p>\n
New Zealand\u2019s peak milk production months are September through to January.<\/p>\n
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.<\/p>\n