Skim milk powder hits its highest price since 2022 as butter falls at dairy auction

Global dairy prices rose 1.2% at the latest Global Dairy Trade auction, led by powders, taking the average price to US$3928 (NZ$6984), RNZ reported.

Whole milk powder, the product that does most to set what New Zealand farmers are paid for their milk, rose 1.2% to US$3605. Skim milk powder rose 4.3% to US$3847, its highest average on the platform since July 2022.

Butter fell 0.3% to US$4740, its lowest since September 2023.

"There's been a continuation of the two-speed product mix with the divergence of price increases for milk powders, while milk fats trend lower," NZX dairy analyst Rosalind Crickett said, according to RNZ.

Crickett said demand for protein ingredients kept pushing powder sales. Global stocks of milk fat remain high, mainly because the US, Argentina and Europe are exporting more, RNZ reported. Fonterra also put more butter up for sale, with its volumes on the platform up 7.9% on the previous auction.

Crickett said butter and anhydrous milk fat both fell less than futures prices and traders had expected.

NZX's own price report, updated on Thursday 8 October, breaks the results down by delivery period. Fats for nearer delivery held up, with premium anhydrous milk fat up 1.05% to US$5,775 and unsalted butter up 0.42% to US$4,775. For delivery further out, Fonterra's winning prices for premium anhydrous milk fat fell 2.17% and 3.42%, while its medium heat skim milk powder rose more than 4%.

The powder result matters most on the farm. Last month Fonterra raised its 2026/27 milk price forecast and narrowed the range, citing better results at recent auctions, RNZ reported. It now forecasts NZ$9.50 per kilogram of milk solids, within a range of NZ$8.50 to NZ$10.50.

Whole milk powder prices have "stabilised" over recent events, Crickett said. This week's 1.2% rise gives some support to that forecast. Fonterra has not announced another change.

Fonterra will offer less on the platform over the next few auctions, Crickett said.

US and EU output rose slightly in the latest data, while China's fell almost 3%, Crickett said. Production in key regions was mostly still growing, she said, but the momentum had started to ease.

There is "likely to be more volatility" in the coming months, she said.