The good times are flowing for dairy farmers — for now, at least — with Fonterra announcing its 2025/26 milk price forecast at $10 per kilogram of milksolids.

The strong price reflects solid global demand, although the cooperative warns that geopolitical uncertainty still looms large and Fonterra chief executive Miles Hurrell warned that things could still change.

“Looking at the season ahead, we expect this demand to continue for now, but we acknowledge the ongoing geopolitical uncertainty and the potential for a wider series of outcomes across the season,” he said.

That uncertainty is reflected in the wide forecast range for the new season, which sits between $8 and $11 per kg of milksolids.

“The fact that Fonterra has signalled a price range of $8–$11 for the 2025/26 season indicates that global dairy trade dynamics are still subject to the volatility of supply and demand,” Mid Canterbury Federated Farmers dairy chairperson Nick Giera said.

Despite the potential risks, confidence in the sector is on the rise.

Giera described the forecast price as “very positive” for the local economy.

“The confidence levels are high and this is piquing the interest of investors and those who have the opportunity to convert to dairy,” he said.

The milk payout remains a major economic force, with the forecast price representing approximately $15 billion injected into the New Zealand economy — much of it flowing into rural communities.

Giera stops short of predicting another dairy boom, though, noting that the landscape today differs markedly from the early 2000s.

“For a start, land values are higher, and there is little or no conversion development margin, and rules around land use intensification are a lot tighter now than it was then.”

Fonterra has also reported a strong financial performance in its third-quarter update, posting a profit after tax of $1.16 billion — up 11% on the same period last year.

The co-operative attributes the increase to solid demand for key dairy products and a well balanced product mix. Earnings per share rose to 70 cents, a 13% increase, with full year guidance now narrowed to 65–75 cents — a firmer outlook than the 55–75% range issued in March.

“We’ve seen a solid lift in earnings and continue to deliver value to farmer shareholders through both the milk price and dividend,” Hurrell said.

Fonterra has maintained a return on capital of 11%, within its long-term target range, though slightly down from 11.9% previously.

Giera said most dairy farmers were happy with the company’s performance.

“The return on capital invested in the co-op is competitive with the long run returns from dairy farming.”

Looking ahead, Fonterra is continuing its strategic shift.

Last year, the co-op announced plans to exit its global consumer brands — including Anchor and Mainland — to focus more on high performing business-to-business operations.

Hurrell confirmed this transition was progressing, with divestment options under careful consideration and a shareholder vote expected in due course.

“Given the confidence we have in our strategy, we have strong conviction that a divestment is the right choice for the co-op and its owners”, Hurrell said.

He added that Fonterra will retain a global footprint, with its products continuing to reach over 100 countries.

The company also intends to return some of the capital raised from the divestment to shareholders and unit holders.

While the overall outlook remains positive, Fonterra acknowledged challenges in the final quarter of the year — including seasonal pressures, rising input costs, and ongoing investments in digital infrastructure.

Still, Hurrell said the co-op is finishing the financial year on solid ground, with “a strong balance sheet” and confidence it will meet its financial targets.

by Claire Inkson