New Zealand and Australia close the season on a strong note

New Zealand and Australia both closed the 2025/26 milk season with stronger-than-expected production, supported by favorable milk composition and improved farm performance. While New Zealand recorded a record season, Australia also finished on a positive note with accelerating production growth and broad regional gains, despite poor results earlier in the season. Looking ahead, however, weather uncertainty and rising input costs remain risks that could affect milk production in both countries over the coming months.New Zealand closed the 2025/26 season with record production, with milk output growing by 3.65% year-over-year to 1.02 million tons in May. At the same time, milk composition remained notably strong during the season, resulting in a milk solids production of 108,730 tons. This represented a 5.03% increase compared to the previous year, notably outpacing the growth in liquid milk.Milk production, therefore, has reached record levels for the season and for the beginning of 2026. New Zealand’s cumulative milk production increased by 5.4% to 8.91 million tons through May, while MS production grew even further by 6.3% to 861,652 tons.Moisture in the country has varied notably, with rainfall expected to be average or low for most of the country, except for above-normal conditions in the west of the Southern Island. Temperatures are expected to be average for the period between May and July, although some isolated areas in the Southern Island and the west of the North Island have a higher chance of experiencing cold spells. Both the influence of frost, cold temperatures, and lower moisture can rapidly affect pasture growth.This situation is further compounded by pressure from input costs, which have been marked by a tight supply and volatility, deriving from geopolitical tensions and conflict at the Strait of Hormuz. This has not only affected fuel prices but has also increased fertilizer costs, such as Urea (Egypt, +48.6%), DAP (Morocco, +29.2%), and potash (Canada, +5.6%). These developments indicate that input prices could remain increasing in the coming months, which could offset productivity gains, particularly if the weather conditions are not favorable.Australia’s milk production recovers by the end of the seasonDespite a higher threat from El Niño, milk production in Australia also increased by a substantial 5.4% compared to the previous year, reaching 354.04 billion liters. While production grew in almost every region, a 6.4% increase in Victoria’s output was the main driver of the country’s increase. The only decline was posted by South Australia, with production falling by 3.9% to 21.9 billion liters.The nutritional content of milk also improved during the month, rising to 4.55% (+0.4%) in fat and to 3.59% (+0.6%) in protein. As a result, MS output increased by 6% year-over-year in May, outpacing liquid milk production growth.May production accelerated from the 4.1% expansion observed in April, cementing a stronger result for Australian dairies in the course of 2026. As of May, year-to-date output stands at 3.18 billion liters, up 2.9% compared to the previous year.The increase in production was supported by mostly favorable conditions, with abundant rainfall in late May across Queensland and New South Wales. That said, drought risks remain significant across the country during the growing season, with the Bureau of Meteorology estimating a 60 to 80% probability that rainfall will remain lower than the median in the winter months.Echoing developments in New Zealand, farm input costs remain elevated. Contrasting with the abundant rainfall, the prices of several feedstuffs increased since April, with average prices increasing in cereal hay (+3% MoM in Southern Australia), Wheat (+4-5% MoM), and DAP (+5% MoM). Furthermore, water trades have reported a price increase ranging between 85% and 112% compared to the previous year. All things considered, the Australian sector closed the season on a strong footing, although remaining vulnerable to shocks from input costs and unfavorable weather conditions.