Global dairy prices continue to slide, with the latest Global Dairy Trade (GDT) auction showing a 3% fall to US $3678/tonne, marking the 7th consecutive drop and the lowest point in 15 months.
According to ASB senior economist Chris Tennent-Brown, the downturn is no surprise. Early signals showed exceptionally strong milk production this season—driven by farmers reacting to last year’s record-high milk price, which crossed NZ$10/kg milk solids.
Why Oversupply Happened
- Last season’s high payout motivated farmers to push production aggressively.
- That individual incentive—“make more milk while prices are good”—scaled up into national-level oversupply.
- Oversupply pushed prices downward, exactly as early forecasts predicted back in May.
Price Forecast
- ASB is holding its NZ$9.75/kgMS forecast.
- Fonterra started at around $10, but with a wide band acknowledging volatility.
- Tennent-Brown notes that $9.50–$9.75/kgMS is still historically strong, but sentiment is lukewarm because the previous year set an unusually high benchmark.
Read More: Milma’s Kollam Dairy Opens Its Doors to the Public on Nov 24–25
Weather Is the Wildcard
Last year’s summer drought curbed late-season production, ironically supporting higher prices.
This year, if favourable weather continues, production will stay strong — meaning:
- More supply
- More downward pressure
- Fewer chances for a price rebound
The Core Message
Farmers aren’t doing anything wrong—they’re responding rationally to high prices. But collectively, it fuels oversupply that drags prices down. Unless weather or demand shifts dramatically, a price turnaround is unlikely in the short term.
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Disclaimer
I do my best to share reliable and well-researched market insights but occasional errors or omissions may slip through. Please view all content as informational, not financial advice.
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