November 6, 2025 • 5 mins
Prices fell in the latest Global Dairy Trade auction, and it's sparked concern for what this means for the dairy sector.
This week's 2.4 percent drop is the sixth consecutive decline for the GDT auction, and follows a 1.4 percent dip two weeks ago.
HighGround dairy analyst Stuart Davison explains further.
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Speaker 1 (00:00):
Now let's deal with what is going on with milk.
Fonterra's farm gate milk price is being tipped to fall
below the ten dollar mark after yesterday's Global Dairy Trade
auction the price of whole milk powder. If you've been
following this, you will have noticed it's fall and twenty
percent since May and Fonterra's current rage for the farm
great milk price is nine dollars to eleven dollars per
kge of milk solid. Stuart Davison is a dairy analyst
(00:20):
for Higher Ground.
Speaker 2 (00:21):
Hey Stewart, mate, how are you?
Speaker 1 (00:23):
I'm very well, Thank you? Do you reckon it's inevitable
that it's going to drop?
Speaker 2 (00:27):
Yes, I don't think it's an edible.
Speaker 3 (00:28):
We've definitely seen the market fall in the last little
while and the big driver's milk supply, so we've seen
a lot of milk being produced everywhere. All the export
nations are well ahead on milk production through Q three
and that are likely follow into Q four.
Speaker 2 (00:41):
And into early twenty six. So supply is the story?
Speaker 1 (00:44):
Yeah, like not enough demand for that supply?
Speaker 3 (00:48):
Well, demand's actually reasonably firm. We've seen a few tumbles
and trips here and there in the market. But demand's
not that far lower than normal, but milk production is
just outstripping that growth of demand.
Speaker 1 (00:57):
Why what's going on?
Speaker 2 (01:00):
Two things.
Speaker 3 (01:00):
Milk pricing, as we see in New Zealand is leading
farmers globally to produce more.
Speaker 2 (01:04):
You know, we were in.
Speaker 3 (01:05):
A very tight situation supply supply reasons in the last
eighteen months. The market was screaming for more milk and
milk solds, especially milk fat in the last eighteen months.
Speaker 2 (01:16):
And the market's got that supply to catch up.
Speaker 3 (01:18):
Now and now we're in that transition period between undersupply
moving to oversupply. So you know, milk prices are just
driving production everywhere.
Speaker 1 (01:27):
If it does fall below the ten dollar mark, as
you say, what does it fall two?
Speaker 3 (01:31):
Well, yeah, how quickly it gets down and where it
goes to is up for discussion at the moment, I think,
you know, if we look at the milk price futures
market at the moment, yeah, we're trading about nine dollars
seventy three there at the minute. We could very quickly
go lower if we see the GDT auction in two
weeks time ago.
Speaker 2 (01:48):
Even you know, especially power prices move even lower.
Speaker 3 (01:51):
You know, my sort of early forecast in the year
was sort of nine dollars twenty but I've sort of
regauged things. At the moment, we're probably closer to nine
forty nine fifty all things considered. But you know, we
just have to look back to the twenty two twenty
three season when prices fell seventy cents from the peak
to the trough during the season. So yeah, in the
same timeframe, we've got left run in this season, so
(02:14):
you know, there's there's some serious movement potential.
Speaker 2 (02:17):
Left to run.
Speaker 3 (02:17):
Yeah.
Speaker 1 (02:18):
Look, you know this obviously sounds bad, but actually, if
you put it in kind of historical context, it's still
a pretty good payout, isn't it.
Speaker 3 (02:25):
Well, and that's that's the big driver of the expectation
of more milk supply as well. So yes, you know,
even if we get down to nine nine dollar handle,
and the farmers listening will not let me saying that,
but you know, they're still making a lot of money
generally in New Zealand at that point, and you know,
feed prices, interest rates, fuel all those input costs that
actually ease lower in the last twelve months as well,
So margin wise, things are still looking pretty good.
Speaker 2 (02:46):
And you know, if you look at price.
Speaker 3 (02:48):
As a signal for supply, the question is actually how
low does the milk price need to get to sort
of condense milk production a little bit globally as well.
So that's the question now, is how low will milk
prices go? How quickly will farmers respond to the signals?
Speaker 2 (03:01):
And usually, you know the general rule.
Speaker 3 (03:03):
Of thumbers and agriculture, you know, the supply response is
relatively slow on both sides. So we don't expect a
quick response from anyone, and milk prices are going to
get a lot lower before we see the response anywhere.
Speaker 1 (03:16):
Stuart, I haven't spoken to you since the sale of
Fonterra's consumer brands to luck to Lease and Winston obviously
getting pretty vexed about it and saying they're going to
regress it. Do you think they're going to regress it.
Speaker 3 (03:26):
I don't think they're going rigord it at all. I think,
you know, we're two sides of that. I think the
farmer's side. You know, they're going to do well without
two dollars and the and their budgets, and they've got
a lot of ways they can spend that on their
own businesses and they'll quite enjoy that capital sort of
breather room on the Fonterier side as well. I think,
you know, the strategies have been talked about pretty clearly,
and you know, I think what their politicing in New
(03:48):
Zealand seems to miss very bluntly. They're very focused on
the fact that Fonteria is going to be an ingredients business,
and I think that's you know that the assumption is
that means the company is then only in commodities it's based.
Speaker 2 (04:01):
I think we missed that the world of dairy is
very quickly going towards higher fractionalization of dairy, so you know,
getting right down to the nitty.
Speaker 3 (04:08):
Gritty parts of the milk solid and pulling all the
value out of it.
Speaker 2 (04:11):
That's that's what the market.
Speaker 3 (04:12):
Wants, you know, still buying homic powder and skim and
and all those other big name commodities, but you know,
the market screens for high proteins and more way protein
isolates and milk protein concentrates and all these things that
go into the high end of products and are used
for very specific use cases. And that's you know, that's
where Fontera is telling us they want to go and
(04:33):
this frees them up to make that strategy approach. And
they've already started an investment channel to you know, we
look at Startholme protein investment that's going on, and then
all the expectations of what else they're going to do
have talked about with their protein plans too.
Speaker 2 (04:46):
So I think it's I think it's a good move.
Speaker 3 (04:48):
It's just you know, the the other question we probably
have to start asking ourselves is k Dairy and the
Kiwi dairy industry is how much money are we willing
to invest in the co op to make sure we
can chase those higher value fractional lineational plants.
Speaker 1 (05:00):
Down to Stuart, as always, it's really wonderful to talk
to you. Thank you, Stuart Davison, Higher Ground Dairy Analyst.
Speaker 3 (05:06):
For more from Hither Duplessy Allen Drive, listen live to
news talks it'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
Now let's deal with what is going on with milk.
Fonterra's farm gate milk price is being tipped to fall
below the ten dollar mark after yesterday's Global Dairy Trade
auction the price of whole milk powder. If you've been
following this, you will have noticed it's fall and twenty
percent since May and Fonterra's current rage for the farm
great milk price is nine dollars to eleven dollars per
kge of milk solid. Stuart Davison is a dairy analyst
(00:20):
for Higher Ground.
Speaker 2 (00:21):
Hey Stewart, mate, how are you?
Speaker 1 (00:23):
I'm very well, Thank you? Do you reckon it's inevitable
that it's going to drop?
Speaker 2 (00:27):
Yes, I don't think it's an edible.
Speaker 3 (00:28):
We've definitely seen the market fall in the last little
while and the big driver's milk supply, so we've seen
a lot of milk being produced everywhere. All the export
nations are well ahead on milk production through Q three
and that are likely follow into Q four.
Speaker 2 (00:41):
And into early twenty six. So supply is the story?
Speaker 1 (00:44):
Yeah, like not enough demand for that supply?
Speaker 3 (00:48):
Well, demand's actually reasonably firm. We've seen a few tumbles
and trips here and there in the market. But demand's
not that far lower than normal, but milk production is
just outstripping that growth of demand.
Speaker 1 (00:57):
Why what's going on?
Speaker 2 (01:00):
Two things.
Speaker 3 (01:00):
Milk pricing, as we see in New Zealand is leading
farmers globally to produce more.
Speaker 2 (01:04):
You know, we were in.
Speaker 3 (01:05):
A very tight situation supply supply reasons in the last
eighteen months. The market was screaming for more milk and
milk solds, especially milk fat in the last eighteen months.
Speaker 2 (01:16):
And the market's got that supply to catch up.
Speaker 3 (01:18):
Now and now we're in that transition period between undersupply
moving to oversupply. So you know, milk prices are just
driving production everywhere.
Speaker 1 (01:27):
If it does fall below the ten dollar mark, as
you say, what does it fall two?
Speaker 3 (01:31):
Well, yeah, how quickly it gets down and where it
goes to is up for discussion at the moment, I think,
you know, if we look at the milk price futures
market at the moment, yeah, we're trading about nine dollars
seventy three there at the minute. We could very quickly
go lower if we see the GDT auction in two
weeks time ago.
Speaker 2 (01:48):
Even you know, especially power prices move even lower.
Speaker 3 (01:51):
You know, my sort of early forecast in the year
was sort of nine dollars twenty but I've sort of
regauged things. At the moment, we're probably closer to nine
forty nine fifty all things considered. But you know, we
just have to look back to the twenty two twenty
three season when prices fell seventy cents from the peak
to the trough during the season. So yeah, in the
same timeframe, we've got left run in this season, so
(02:14):
you know, there's there's some serious movement potential.
Speaker 2 (02:17):
Left to run.
Speaker 3 (02:17):
Yeah.
Speaker 1 (02:18):
Look, you know this obviously sounds bad, but actually, if
you put it in kind of historical context, it's still
a pretty good payout, isn't it.
Speaker 3 (02:25):
Well, and that's that's the big driver of the expectation
of more milk supply as well. So yes, you know,
even if we get down to nine nine dollar handle,
and the farmers listening will not let me saying that,
but you know, they're still making a lot of money
generally in New Zealand at that point, and you know,
feed prices, interest rates, fuel all those input costs that
actually ease lower in the last twelve months as well,
So margin wise, things are still looking pretty good.
Speaker 2 (02:46):
And you know, if you look at price.
Speaker 3 (02:48):
As a signal for supply, the question is actually how
low does the milk price need to get to sort
of condense milk production a little bit globally as well.
So that's the question now, is how low will milk
prices go? How quickly will farmers respond to the signals?
Speaker 2 (03:01):
And usually, you know the general rule.
Speaker 3 (03:03):
Of thumbers and agriculture, you know, the supply response is
relatively slow on both sides. So we don't expect a
quick response from anyone, and milk prices are going to
get a lot lower before we see the response anywhere.
Speaker 1 (03:16):
Stuart, I haven't spoken to you since the sale of
Fonterra's consumer brands to luck to Lease and Winston obviously
getting pretty vexed about it and saying they're going to
regress it. Do you think they're going to regress it.
Speaker 3 (03:26):
I don't think they're going rigord it at all. I think,
you know, we're two sides of that. I think the
farmer's side. You know, they're going to do well without
two dollars and the and their budgets, and they've got
a lot of ways they can spend that on their
own businesses and they'll quite enjoy that capital sort of
breather room on the Fonterier side as well. I think,
you know, the strategies have been talked about pretty clearly,
and you know, I think what their politicing in New
(03:48):
Zealand seems to miss very bluntly. They're very focused on
the fact that Fonteria is going to be an ingredients business,
and I think that's you know that the assumption is
that means the company is then only in commodities it's based.
Speaker 2 (04:01):
I think we missed that the world of dairy is
very quickly going towards higher fractionalization of dairy, so you know,
getting right down to the nitty.
Speaker 3 (04:08):
Gritty parts of the milk solid and pulling all the
value out of it.
Speaker 2 (04:11):
That's that's what the market.
Speaker 3 (04:12):
Wants, you know, still buying homic powder and skim and
and all those other big name commodities, but you know,
the market screens for high proteins and more way protein
isolates and milk protein concentrates and all these things that
go into the high end of products and are used
for very specific use cases. And that's you know, that's
where Fontera is telling us they want to go and
(04:33):
this frees them up to make that strategy approach. And
they've already started an investment channel to you know, we
look at Startholme protein investment that's going on, and then
all the expectations of what else they're going to do
have talked about with their protein plans too.
Speaker 2 (04:46):
So I think it's I think it's a good move.
Speaker 3 (04:48):
It's just you know, the the other question we probably
have to start asking ourselves is k Dairy and the
Kiwi dairy industry is how much money are we willing
to invest in the co op to make sure we
can chase those higher value fractional lineational plants.
Speaker 1 (05:00):
Down to Stuart, as always, it's really wonderful to talk
to you. Thank you, Stuart Davison, Higher Ground Dairy Analyst.
Speaker 3 (05:06):
For more from Hither Duplessy Allen Drive, listen live to
news talks it'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
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