{"id":458379,"date":"2026-06-03T06:39:08","date_gmt":"2026-06-03T06:39:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/458379\/"},"modified":"2026-06-03T06:39:08","modified_gmt":"2026-06-03T06:39:08","slug":"the-strait-of-hormuz-is-no-longer-a-distant-watchpoint-its-at-the-farm-gate","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/458379\/","title":{"rendered":"‘The Strait of Hormuz is no longer a distant watchpoint, it’s at the farm gate’"},"content":{"rendered":"

DairyNZ says the 2024\/25 dairy season was one of the strongest financial years on record for dairy farmers but has warned the outlook for the current season is more precarious due to disruption caused by the closure of the Strait of Hormuz.<\/p>\n

DairyNZ is the sector organisation that represents New Zealand’s dairy farmers. For the 2026\/27 season it forecasts the breakeven milk price (BEMP) will rise $0.36 to $8.79\/kgMS, largely due to rising fertiliser, feed, fuel and interest costs.<\/p>\n

The breakeven milk price is the milk sale price per kilogram of milksolids to cover a farm\u2019s costs in a season. It excludes capital expenditure and principal repaid on loans.<\/p>\n

DairyNZ expects farm working expenses to rise to $6.19\/kgMS and operating profit to fall to $3.88\/kgMS in the current season.<\/p>\n

DairyNZ highlights this with the release of its 20th annual survey of NZ dairy farmers for the 2024\/25 season and its Econ Tracker Tool<\/a>, which provides detailed financial estimates and analysis for the 2025\/26 and 2026\/27 seasons.<\/p>\n

The organisation\u2019s head of economics, Mark Storey, said the survey confirms the 2024\/25 season was one of the stronger financial years recorded for NZ dairy farmers over the past decade.<\/p>\n

This was driven by a combination of increased milk production and high milk prices, with performance at decade-high levels across many measures, including operating profit, cashflow and the value of farmers\u2019 balance sheets, according to Storey.<\/p>\n

‘The Strait of Hormuz is at the farm gate’<\/p>\n

Storey said the recently concluded 2025\/26 season also finished\u00a0\u201con a series of records\u201d. (The NZ dairy season officially runs from 1 June to 31 May).<\/p>\n

\u201cBased on DairyNZ’s production data, national milksolids are set to reach around 2.02 billion kgMS, the first time New Zealand has passed the two-billion mark, and about 4.5% above last season’s 1.94 billion. Many farms enter winter with their strongest balance sheet in recent years with strong production and solid payout,\u201d Storey said.<\/p>\n

\u201cBut the 2026\/27 picture has shifted materially since our March update. The Strait of Hormuz is no longer a distant watchpoint, it is at the farm gate. Four months in, the disruption is feeding through fuel, fertiliser, feed prices and freight prices (the 4Fs) that farmers are seeing right now.\u201d<\/p>\n

\u201cSpring will be the pressure point for farmers. Fertiliser, 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 he said.<\/p>\n

According to DairyNZ, almost 60% of NZ\u2019s dairy herds are run by owner-operators.<\/p>\n

DairyNZ\u2019s survey found that for owner-operators in 2024\/25, their cash operating surplus rose from $612,103 (or an inflation-adjusted $628,464) to $903,774. Discretionary cash more than doubled from $253,926 to $573,715 while cash surplus jumped from just over $4,000 to $110,829.\u00a0<\/p>\n

DairyNZ said dairy operating profit per hectare for owner-operators rose from $2,845 to $4,849, and operating profit per kg of milksolids increased from $2.41 to $3.98.<\/p>\n

Although operating expenses increased in both nominal and inflation-adjusted terms, the rate of increase was smaller (4% per kgMS and 8% per hectare) than the increase in gross farm revenue (21% per kgMS and 25% per hectare), resulting in a \u201csignificant gain in margins\u201d, according to DairyNZ.<\/p>\n

\u2018Dairy farm profit margins will be squeezed\u2019<\/p>\n

For the 2026\/27 season, giant dairy co-operative Fonterra\u2019s forecast for the farmgate milk price<\/a> is $9.75 within a range of $8.00 to $11.00 per kgMS. Fonterra said in May this reflected potential impacts across the season from ongoing geopolitical risks and inflationary pressures.\u00a0<\/p>\n

Fonterra also tweaked its 2025\/2026 farmgate milk price forecast in May, lowering it from between $9.40 and $10.00 to between $9.60 and $9.80 per kgMS. Fonterra\u2019s midpoint has remained unchanged at $9.70 per kgMS.<\/p>\n

ANZ NZ said on Wednesday its farmgate milk price forecast for 2026\/27 is now $9.20\/kgMS, revised up from $8.70.\u00a0<\/p>\n

\u201cThe new season is starting on a positive footing, with good dairy commodity prices and a favourable exchange rate,\u201d Matt Dilly, an agricultural economist at ANZ, 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. The NZD is forecast to strengthen as well.\u201d<\/p>\n

Dilly said on-farm costs are rising as a result of the Middle East conflict and the closure of the Strait of Hormuz.\u00a0<\/p>\n

\u201cEven with the higher farmgate milk price forecast, dairy farm profit margins will be squeezed,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"DairyNZ says the 2024\/25 dairy season was one of the strongest financial years on record for dairy farmers…\n","protected":false},"author":2,"featured_media":458380,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-458379","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/458379","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=458379"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/458379\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/458380"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=458379"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=458379"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=458379"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}