Fonterra's farmgate milk price forecast has been reduced to $9.50 per kilogram of milk solids from $10 on the back of weaker global prices

Giant dairy co-operative Fonterra has cut its forecast milk price for farmer shareholders for the current season to $9.50 from $10 after continuing falls in global dairy prices and rises in production.

At $9.50 per kilogram of milk solids, the farmgate milk price would still be a strong one, but would be below the record $10.16 price paid for the 2024-25 season.

Fonterra forecasts its price in a sometimes very broad range. Previously this season's forecast range was $9-$11, with the assumed price of $10 being the 'midpoint' of that forecast range.

Now, the co-operative has narrowed the range to between $9 and $10 with the new midpoint being $9.50, which if achieved would still be the second highest ever price (though that's not inflation-adjusted).

In conjunction with the new price forecast, Fonterra's also issued an update to its forecast milk collections for the 2025-26 season, raising these from 1,525 million kgMS to 1,545 million kgMS.

The co-op's chief executive Miles Hurrell said "strong milk flows" are being seen both in New Zealand and from other milk producing nations this season.

"This increase in milk supply has put downward pressure on global commodity prices, with seven consecutive price drops in recent GlobalDairyTrade events."

As a result Fonterra had narrowed the forecast milk price range for the season and adjusted the midpoint.

"Fonterra started the season with a wide forecast range of $8.00-$11.00 per kgMS. The new midpoint of $9.50 per kgMS is in the middle of this range and remains a strong forecast for the season," Hurrell said.

"We continue to be focused on maximising returns for farmer shareholders through both the Farmgate Milk Price and earnings. This includes through building strong relationships with customers who value our products, utilising price risk management tools, and optimising our product mix."

Major bank economists had already been anticipating a lower price as global dairy prices have continued to slide - now down 18% since May.

BNZ senior economist Doug Steel dropped his forecast to $9.50 last week, while ANZ's agricultural economist Matt Dilly trimmed his forecast to $9.65.

Steel had noted that dairy prices have been generally strong in 2025 and the national income flows from it have been robust.

"However, the dynamics are changing with the global dairy market now clearly softening. A surge in global milk supply is putting material downward pressure on prices."

ANZ's Dilly commented that he expected a weakening trend as the season developed, but global prices "have fallen further than our previous forecast".

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