New Zealand closes the year with strong milk output

New Zealand finished the year with milk production still gaining momentum. December confirmed that milk flows remain strong even after the seasonal peak. Growth is increasingly coming from better productivity and milk quality rather than the number of cows. Meanwhile, milk prices declined in the final months as high supplies weighed on the market. While the market is observing positive price signals, the recovery is likely a seasonal response instead of a full market turnaround.Milk collections in New Zealand in December reached 2.71 million tons, representing a 2.45% increase compared to the previous year. This represented an acceleration from the 2.4% annual growth observed in November, making December the third consecutive month of accelerating production and closing 2025 on a strong note. Although the seasonal peak had already passed, milk flows remain abundant as the country moves into summer. Meanwhile, milk composition improved further. Milk solids (MS) output increased by 3.12% year-over-year to 235,413 tons, mirroring the growth in liquid milk.These monthly developments contributed to a positive performance throughout the whole year. Total liquid milk production reached 1.97 billion tons, indicating a 1.85% increase from the previous year, while MS output increased by 2.65% to 21.93 million tons. Additionally, this consolidated a steady growth in production since 2022, highlighting the highest yearly production of liquid milk and MS in the past five years.A notable share of the production growth occurred in the second half of the year. Between September and December, milk output increased by an estimated 251,000 tons, amplifying supply availability toward the end of the year.New Zealand’s production levels were reached despite a decline in cow numbers. According to DairyNZ, the national dairy herd declined by 0.5% over the previous season to 4.68 million cows in 2024/25. Meanwhile, average production reached 414 kilo MS per cow according to DairyNZ, underscoring the country’s focus on improving efficiency over herd expansion.Pricing faced an overall decline, despite recent upticksAn increasing trend in production increasingly weighed on milk pricing across Q4 2025. While remaining stable since the beginning of the year, Fonterra’s milk price to farmers declined from NZ$76.02 to NZ$68.33 per 100 kilo between September and November. This adjustment was coupled with increasing milk availability both in New Zealand and globally.According to Rabobank, global dairy prices declined by the end of 2025 due to the high milk availability, which is expected to continue in the short term. Fonterra also reduced the price forecast for the 2025/26 season to a range between NZ$8.5 and 9.5 per kilo MS, an average fall of NZ$0.5 per kilo MS.Dairy prices showed signs of stabilisation recently, the first Global Dairy Trade (GDT) auction of 2026 reporting a 6.3% increase. Fewer volumes offered and stronger buying interest, particularly from the Middle East, were supporting factors of the price growth. Additionally, NZX linked the reduced supply to the end of the milk peak in New Zealand, although production remains high. Therefore, it is not possible to conclude that the market has turned bullish yet.Balancing weather and market in the new seasonLooking ahead, weather conditions generate uncertainty for New Zealand’s pasture-based system. While summer rainfall has so far been supportive for production due to the influence of La Niña conditions, climate indicators could shift toward neutral as February approaches, according to Rabobank. This transition could result in drier mid-to-late summer conditions, affecting pasture growth and feed availability. From a market perspective, pricing will depend on the balance between a strong supply and uneven demand recovery. Overall, New Zealand finished the year with a strong production level, although the output continues to restrict the recovery of prices. A sustained recovery will depend on the regulation of production in the new year and the extent to which the demand absorbs existing volumes.