New Zealand’s milk supply grows in November, amid Australian contraction

Strong milk flows in New Zealand marked November, which contrasted with continued contraction in Australia. While New Zealand’s output accelerated and added pressure to global prices, Australia’s production still recovers from weather constraints and input-related challenges, driving a diverging supply dynamic between the two producers.Milk production in New Zealand reached 2.95 million tons in November, reflecting a 2.4% increase over the previous year. This marked an acceleration compared to the 1.7% growth recorded in October, making November one of the strongest contributors to the annual output growth.As a result, cumulative milk production rose by 1.8% year-over-year to 19.22 million tons as of November, cementing a broadly positive production trend across the year. Moreover, the nutritional content of milk improved, resulting in a higher milk solids (MS) availability for processors. The cumulative MS output increased by 2.6% from the previous year to 1.74 million tons through November.The strong supply growth in New Zealand, coupled with a high availability in the EU and the United States, has contributed to a notable decline in global dairy prices. Reflecting this trend, Fonterra adjusted its milk price forecast down, from NZ$9–10 per kilo MS to NZ$8.5–9.5, with a midpoint of NZ$9 per kilo MS.Despite this decline, DairyNZ estimates the breakeven milk price at NZ$8.5 per kilo MS, suggesting that most farms would remain profitable in the current season. In the short term, farmers are expected to maintain production levels while focusing on cost-containment strategies. However, a prolonged period of continued declines in prices could weigh on investment appetite and farmer confidence, particularly during a phase of historically elevated milk flows. Over the longer term, sustained bearish market conditions may limit further production growth as incentives gradually weaken.Australia: November confirms ongoing downward production trendAustralia’s milk production continued to decline in November, with total output reaching 849.2 million liters, falling 2.17% compared to the previous year. The contraction was largely driven by falling volumes across several key producing states.Victoria, which accounted for 63.3% of national milk output in November, recorded a 3.1% year-on-year decline, making it the main driver of the national contraction. Further reductions were observed in South Australia (-8.4%), Western Australia (-1%), and Tasmania (-0.1%), while only New South Wales (+2.2%) and Queensland (+2.9%) reported an increase in production.These monthly developments are consistent with a broader negative trend. As of November, cumulative Australian milk production fell by 2.5% year-on-year to 7.43 billion liters, underscoring the structural challenges faced by the sector.Weather conditions remain a key factor. After a prolonged drought earlier in the year, rainfall in southern regions improved during October. In November, soil moisture levels were normal in Victoria, South Australia, and Western Australia, while remaining lower in New South Wales. For the period between December and February, the Bureau of Meteorology forecasts average rainfall for most milk-producing regions, except for Western Australia and Queensland.Despite improved rainfall prospects, water availability remains constrained, with storage levels at Lake Glenmaggie and the Hume Dam below last year’s levels. This has driven temporary water prices in Northern Victoria and Murray Irrigation up by more than 100% compared to a year ago. Meanwhile, cereal hay prices remained broadly stable compared to last year, ranging between AU$225 and AU$330 per ton, despite a sharp month-on-month decline. Overall, Dairy Australia’s Input Price Index has eased since the summer, although it remains slightly above year-ago levels.On the demand side, the Australian dairy sector shows resilience. Both volumes and values of dairy sales increased over the previous year, particularly for private label products and high-protein offerings. Combined with the lower availability of raw milk, this has supported relatively higher farmgate prices compared to other major dairy exporters, even as prices continue to soften in line with global trends. Taken together, the 2025/26 outlook for Australia remains cautiously optimistic, balancing the improved demand against risks related to weather uncertainty, water availability, input costs, and global price pressure.