Dairy farmers face higher fuel and fertiliser costs despite strong payout
Rising diesel, petrol and fertiliser costs are squeezing New Zealand dairy farms, even as strong milk payouts still provide some margin support.
New Zealand dairy farmers are heading into the next season with stronger milk income but also with mounting pressure from higher fuel, fertiliser and service costs. Coast & Country News reports that Waikato Federated Farmers president Phil Sherwood says farmers are at the sharp end of the price surge because they cannot simply pass those higher costs on to someone else in the supply chain.
Sherwood said the recent spike in diesel and petrol prices is already being passed through by contractors and service providers that work with the rural sector. Fertiliser costs have already moved higher, and spreading charges are likely to follow. The same pressure is emerging from feed suppliers and from contractors involved in harvesting, re-sowing and planting. That matters because winter crops are going in now, making this a peak period for on-farm operations.
Logistics are adding to the strain. Sherwood said suppliers are increasingly unable to give reliable delivery timeframes to farms. Farmers also face higher costs for operating tractors, quad bikes and private vehicles, as well as for imported minerals used in animal health. He warned that shipping costs will also feed through, meaning that anything imported into farm systems is likely to become more expensive over time.
Higher milk returns are cushioning part of the blow. DairyNZ estimates the average payout for the 2025-26 season at NZ$9.92 per kilogram of milksolids, while the forecast breakeven milk price is NZ$8.36. That implies an average surplus of about NZ$1.56 per kilogram. Season-to-date milksolids production from June 2025 to January 2026 was running 3.3% ahead of the previous season, with Waikato up 1.7%.
For 2026-27, DairyNZ expects a slightly lower average payout but also a slightly lower breakeven price of NZ$8.31 per kilogram, leaving an average surplus still above NZ$1 at NZ$1.07. Sherwood said farmers should avoid panic buying and instead look for savings through better feed conversion efficiency and stronger pasture utilisation. The message for the dairy sector is that current milk prices are still supporting margins, but that cushion could narrow quickly if high energy and fertiliser costs persist.