Cheap butter and expensive protein are pulling the two halves of New Zealand’s dairy income apart. HighGround Dairy quantitative analyst Stu Davison says milk fat, normally the value driver, is now weighing on the Fonterra midpoint.

“We are in a very precarious spot globally on milk production and the whole dairy industry, to be honest,” he says.

He says butter has turned cheap while protein runs high, and Europe shipped record volumes in July.

“So we have a dichotomy of the market pulling our milk values in different directions.”

He says milk volumes are strong worldwide, with Germany’s production up about 6.4% on a year earlier, though growth is forecast to ease into 2027. The pull comes from the United States with a growing proportion of people on GLP-1 weight-loss drugs.

“That’s driving the protein demand, and dairy’s getting a lot of a boost as a result of that.”

CountryWide CONNECT with Andy Thompson & Sarah Perriam-Lampp is our daily rural show livestreamed from 11am-1pm. Visit country-wide.co.nz on how to watch/listen or download the CountryWide CONNECT mobile app, available on Apple iOS and Android.

AI-Assisted Content