December 10, 2025 • 4 mins
The global dairy market is expected to face a period of weaker commodity prices following "stunning" global milk production growth across the second half of 2025, according to Rabobank, in its Q4 Global Dairy Quarterly Report. So is a $9 milk price now on the cards?
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Episode Transcript
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Speaker 1 (00:00):
Affectionately here on the country, I call her the Christmas Grinch.
She bites back about that one. But she is also
a RABO Research Senior agg analyst. Her name is Emma Higgins,
and she is authored the Q four Global Quarterly Dairy Report.
And Emma, I want to start with the sentence that
caught my eye, and this is from you, your words.
(00:21):
There is an elevated risk that farmgate milk price moves
lower across the course of the season, which could mean
that the final season payout lands around the nine dollars
per kilogram of solid smark. That is Christmas Grinch sort
of stuff. Emma, good afternoon, Good afternoon, Jamie.
Speaker 2 (00:41):
Just the season. Look, I promise I'm not stealing Christmas
or trying to like the Grinch, but I am just
trying to make sure that farmers aren't blindsided by what
could be coming down the pipeline. So perhaps think of
me as the Grinch who brings a reality check so
that farmers can plan and prepare accordingly.
Speaker 1 (01:01):
The story about the milk is all about supply. As
I had said often in recent weeks, the tap has
literally been turned on right around the world, and here
in New Zealand. There's just too much supply for the
demand out there at the moment.
Speaker 2 (01:15):
Yeah, absolutely too much milk not enough demand. That's the
story globally, and we're certainly seeing it locally as well.
With eight gdt's moving lower on the trot and look
New Zealand farmers are producing record volumes as well. It
is very bittersweet, right because commodity pressures and commodity prices
themselves are obviously under pressure due to extra supply, and
(01:39):
globally that's the story too. So we think that the
peak of global milk supply from the Big Seven what
we like to call the Big Seven. These guys are
responsible for around eighty percent of global trade. We think
that peak has passed, and that passed in quarter three,
but quarter four is likely to end up at a
very similar level. The good news is that, you know,
(02:00):
twenty twenty six should see some balancing come into play
around milk supply, but it will take probably until the
second half of twenty six for this to emerge.
Speaker 1 (02:09):
We think so was ten dollars just a fleeting moment.
Speaker 2 (02:16):
Well, it's appearing that way, just given that we've moved
from Fonterra forecasting ten dollars down to nine dollars fifty
for the twenty five to twenty sixth season. I think
the reality is that what's changed is that we knew
global milk supply was increasing, right, farmers in New Zealand,
we're making more money, so we and certainly my view
(02:36):
was that we were going to see stronger milk production.
I think what is shot to the market is the
volume coming out of the northern Hemisphere, and it's coming
from two places. One is the United States. Now again
we did see this coming to the extent that you know,
margins were quite positive. But what's been really strong out
of the United States is obviously the dairy beef calf income,
(02:59):
so that's helping to prop up margins now in the
face of weaker milk prices. The real surprise factor has
come out of the EU. And what's happened there is
that established or had a second flush come through, and
that's the result of the blue tongue virus that we've
talked about on previous shows, Jamie. That had an impact
on carving patterns last year, and so this year we've
(03:22):
seen just a change in terms of the milk supply
coming out of the EU market's been caught a little
bit on the hop with all of this together, and
we've got too much milk for market.
Speaker 1 (03:31):
Okay, final question for you, if you're a dairy farmer
listening to this and you're updating your budget as we speak,
what number would you plug in there? Would you plug
a nine dollars flight?
Speaker 2 (03:42):
Well, I think we need to be realistic. You know,
we do have a situation where it does take a
while for those supply taps as you talked about, to
be switched off. Now. Typically, if we think about the
northern hemisphere, it can take up to six months of
negative margins to start seeing those slaughtery really emerge and
(04:02):
changes to the supply scenario. So I think we do
need to be a realistic. Hey, if we get a
balve nine dollars, that's fabulous, But you know, moving into
Christmas and thinking about the year heare in twenty twenty six,
maybe it might be a little bit prudent to think
about a low liment press.
Speaker 1 (04:17):
Emma Higgins from Rabobank, thanks for your time, Thanks for
your contribution throughout twenty twenty five. Always love chatting to you,
and you know I'm only joking about the Grinch bit right.
Speaker 2 (04:28):
Absolutely no, I appreciate the banter we have
Affectionately here on the country, I call her the Christmas Grinch.
She bites back about that one. But she is also
a RABO Research Senior agg analyst. Her name is Emma Higgins,
and she is authored the Q four Global Quarterly Dairy Report.
And Emma, I want to start with the sentence that
caught my eye, and this is from you, your words.
(00:21):
There is an elevated risk that farmgate milk price moves
lower across the course of the season, which could mean
that the final season payout lands around the nine dollars
per kilogram of solid smark. That is Christmas Grinch sort
of stuff. Emma, good afternoon, Good afternoon, Jamie.
Speaker 2 (00:41):
Just the season. Look, I promise I'm not stealing Christmas
or trying to like the Grinch, but I am just
trying to make sure that farmers aren't blindsided by what
could be coming down the pipeline. So perhaps think of
me as the Grinch who brings a reality check so
that farmers can plan and prepare accordingly.
Speaker 1 (01:01):
The story about the milk is all about supply. As
I had said often in recent weeks, the tap has
literally been turned on right around the world, and here
in New Zealand. There's just too much supply for the
demand out there at the moment.
Speaker 2 (01:15):
Yeah, absolutely too much milk not enough demand. That's the
story globally, and we're certainly seeing it locally as well.
With eight gdt's moving lower on the trot and look
New Zealand farmers are producing record volumes as well. It
is very bittersweet, right because commodity pressures and commodity prices
themselves are obviously under pressure due to extra supply, and
(01:39):
globally that's the story too. So we think that the
peak of global milk supply from the Big Seven what
we like to call the Big Seven. These guys are
responsible for around eighty percent of global trade. We think
that peak has passed, and that passed in quarter three,
but quarter four is likely to end up at a
very similar level. The good news is that, you know,
(02:00):
twenty twenty six should see some balancing come into play
around milk supply, but it will take probably until the
second half of twenty six for this to emerge.
Speaker 1 (02:09):
We think so was ten dollars just a fleeting moment.
Speaker 2 (02:16):
Well, it's appearing that way, just given that we've moved
from Fonterra forecasting ten dollars down to nine dollars fifty
for the twenty five to twenty sixth season. I think
the reality is that what's changed is that we knew
global milk supply was increasing, right, farmers in New Zealand,
we're making more money, so we and certainly my view
(02:36):
was that we were going to see stronger milk production.
I think what is shot to the market is the
volume coming out of the northern Hemisphere, and it's coming
from two places. One is the United States. Now again
we did see this coming to the extent that you know,
margins were quite positive. But what's been really strong out
of the United States is obviously the dairy beef calf income,
(02:59):
so that's helping to prop up margins now in the
face of weaker milk prices. The real surprise factor has
come out of the EU. And what's happened there is
that established or had a second flush come through, and
that's the result of the blue tongue virus that we've
talked about on previous shows, Jamie. That had an impact
on carving patterns last year, and so this year we've
(03:22):
seen just a change in terms of the milk supply
coming out of the EU market's been caught a little
bit on the hop with all of this together, and
we've got too much milk for market.
Speaker 1 (03:31):
Okay, final question for you, if you're a dairy farmer
listening to this and you're updating your budget as we speak,
what number would you plug in there? Would you plug
a nine dollars flight?
Speaker 2 (03:42):
Well, I think we need to be realistic. You know,
we do have a situation where it does take a
while for those supply taps as you talked about, to
be switched off. Now. Typically, if we think about the
northern hemisphere, it can take up to six months of
negative margins to start seeing those slaughtery really emerge and
(04:02):
changes to the supply scenario. So I think we do
need to be a realistic. Hey, if we get a
balve nine dollars, that's fabulous, But you know, moving into
Christmas and thinking about the year heare in twenty twenty six,
maybe it might be a little bit prudent to think
about a low liment press.
Speaker 1 (04:17):
Emma Higgins from Rabobank, thanks for your time, Thanks for
your contribution throughout twenty twenty five. Always love chatting to you,
and you know I'm only joking about the Grinch bit right.
Speaker 2 (04:28):
Absolutely no, I appreciate the banter we have
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