Fonterra is due to put out its opening 2026-27 forecast for the milk price on Thursday as well as touching up an end-of-season forecast.
Last March it brought the 2025-26 midpoint to $9.70 per kg of milk solids based on a $9.40/kg to $10/kg range and advanced an earnings guidance range of 50 cents to 65c per share.
At that stage the co-op was looking at the Middle East shock potentially increasing costs in the second half of the year and stirring up further volatility in global commodity prices. Canterbury rival Synlait Milk is forecasting a 2025-26 payout of $9.70/kg.
Federated Farmers dairy chairman Karl Dean said dairy farmers were expecting a less prosperous season ahead of them, but still a good 2026-27 payout.
‘‘It’s not going to be as profitable as this year purely just due to rising costs and we would have to be well over $10 a kg to beat those rising costs in the next couple of months. It’s not going to be a bad year if it’s in that [$9.50/kg to $10/kg] range. That would be pretty good and it would be stable for most people, providing interest rates and [other costs] like that don’t go up.’’
Rabobank has put out a payout forecast of $9.50/kg to $10/kg for the 2026-27 season after a strong close to this season marked by index price rises in eight of the last 10 Global Dairy Trade (GDT) auctions.
Mr Dean said Fonterra would likely start with a cautious range of $8.50/kg to $10/kg as it was always best to under-promise and over-deliver.
‘‘I think cautious optimism will be what they do, the same as last year and a broader range because it’s just so uncertain at the moment.’’
He said markets could react to uncertain freight movements through the Strait of Hormuz and rising energy costs by buying more food, but this scenario had yet to play out.
Higher operating costs had spilled over from fuel increases into labour, fertiliser and other necessary farm spending.
Rabobank cautions farm cost inflation is likely to take some of the edge off farmers’ margins.
‘‘This could see the midpoint of the range skewed higher to support a stronger opening figure, similar to last season and more closely aligned with spot market signals.’’
She said the 2026-27 season was heading to be profitable, but dairy farmers would start the new season on June 1 facing a marked squeeze on margins, driven by persistent cost inflation.
‘‘The ongoing closure of the Strait of Hormuz — now approaching its fourth month — is creating conditions reminiscent of past stagflationary shocks. Initial impacts, particularly higher energy prices, are now flowing through into key upstream dairy inputs, including diesel, fertiliser and industrial goods. Second-round effects are also emerging, with elevated energy costs feeding into broader inflation expectations.’’
The outlook beyond this had become more uncertain, warranting scenario-based planning, she said.
A new report by the bank weighed up lengthy disruption possibly resulting in global food import demand rising sharply as energy-importing nations secured supplies — likely lifting farmgate milk prices.
The 2025-26 season was described as delivering exceptional profitability, underpinned by strong GDT performance and strength across dairy commodities.
Ms Higgins said Fonterra’s midpoint forecast of $9.70/kg for this season was highly profitable for farmers.
Other banks are pitching an opening milk payout forecast of between $8.70/kg to $10/kg for the 2026-27 season.
