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Average Price Differentials

CMV v Milk Prices

Aust v NZ Farmgate Prices

Farmgate milk prices for the 2024-25 season (announced in June 2024) for southern Australian milk producers remain under the strong influence of domestic market requirements for fresh milk, natural cheese, cream and fresh dairy foods.

Domestic dairy product prices have been impacted by a weaker world market in the past year which has put downward pressure on affordable farmgate milk prices. As a result, the 2024-25 opening prices announced by major manufacturers are 11-14% lower than last year.

It’s also important to remember the announced FMP are minimums for the season, with incentives on offer and the possibility of price reviews if global market conditions improve.

The competition for milk at farmgate has been far less intense in the 2024-25 season compared to the early part of the prior year. This is due to the uncertainty of market conditions in the coming year, a reduction in processing capacity, and a small increase in milk supply in southern regions.

Domestic wholesale product prices for cheese and butterfat have been closer to Oceania spot export prices (based on New Zealand quotes) due to increased domestic production and higher stocks of these products through the 2023-24.

The ongoing weak demand for ingredients from China and Southeast Asia has sustained the weakness in global prices for milk powders in recent months.

China’s demand for milk powders have not revived due to increased domestic milk and powder production, while consumer demand for liquid milk and ingredients remains subdued. Those conditions have sustained an over-supply in that country’s dairy supply chain. The weakness in the Chinese economy has continued to impact business and consumer confidence in Southeast Asian dairy markets.

The commodity milk value based on NZ spot export prices has remained near A$7.00/kgMS, compared to Southern Australian average farmgate prices ranging from $7.94 to $8.20/kgMS for the 2024-25 season.

In New Zealand, Fonterra’s 2024-25 expected milk price has been revised down to a mid-point equivalent to about A$7.50/kgMS (adjusting for exchange rates and crude protein), up to 10 per cent below the milk price paid by Australia’s dairy product manufacturers.

The projected full-season cost of raw milk to dairy product manufacturers with exposure to global markets for SMP and cheese is more sustainable and in line with market returns based on current market outlooks.

With the significant cut in WMP import demand from China that has occurred since the end of COVID lockdowns in late 2022, New Zealand’s dairy product manufacturers were forced to shift large volumes of milk into other product streams. The global SMP market remains under price pressure due to weak Chinese and Southeast Asian demand, while the butterfat market has benefitted from tight EU supplies, supporting a strong lift in Butter and AMF prices.

The ongoing weakness in China’s demand for WMP is expected to sustain the increased production of SMP and butterfat through the current NZ season, which may force an easing of those prices through the Oceania peak production season.