DairyNZ modelling shows a Very Strong El Niño could push farm working expenses to $6.78/kgMS and the national breakeven milk price to $9.07/kgMS, as farmers are urged to prepare for tighter margins and potential feed shortages.
The anticipated El Niño event adds a layer of uncertainty to a dairy season already marked by major global events and cost pressures, with the potential for drier conditions to affect pasture growth, feed supply and milk production.
Earth Sciences New Zealand has confirmed El Niño conditions are developing in the tropical Pacific, with the event expected to strengthen through spring, peak in early summer and influence New Zealand’s weather into autumn 2027.
DairyNZ Head of Economics Mark Storey says farmers are now facing the prospect of weather-related challenges on top of existing cost pressures.
“Three months ago, our focus was on the Strait of Hormuz and the impact of higher fuel, fertiliser and feed costs on farm,” says Mark. “While those pressures remain, another challenge has emerged in the form of the strong El Niño. We now need to consider what the weather could mean for pasture growth and feed supply on farm.”
Earth Sciences New Zealand Chief Scientist Chris Brandolino explains that this is shaping up to be a very strong El Niño, and more likely than not, the strongest on record.
“When considering previous very strong El Niño events, as well as what long-range modelling is indicating, drier-than-usual conditions are favoured over northern and eastern areas of New Zealand during spring and summer,” says Chris.
“However, for western and lower parts of the South Island, spring and summer is likely to feature wetter than usual conditions. It’s important that people stay up-to-date and regularly check for the latest outlooks and forecasts, as things may change.”
In its EconTracker Quarterly Update, DairyNZ has modelled two El Niño scenarios - Strong and Very Strong - comparing against a baseline season without significant El Niño impacts.
The modelling shows the national breakeven milk price could increase from $8.62/kgMS under the baseline scenario, to $8.90/kgMS under a Strong El Niño, and $9.07/kgMS under a Very Strong El Niño. Farm working expenses are also modelled to increase from $6.18/kgMS under the baseline scenario to $6.57/kgMS under a Strong El Niño and $6.78/kgMS under a Very Strong El Niño.
“Pasture will take the first hit, creating the biggest driver of the additional cost pressure, with national feed expenses modelled to increase from $1.56/kgMS under the baseline scenario to $2.02/kgMS under a Very Strong El Niño,” explains Mark.
“Milk production is also expected to dip, rather than collapse, with national production modelled to be around 2.1% lower under a Strong El Niño and around 3.3% lower under a Very Strong El Niño.
“While the effects are likely to vary considerably between regions and farms, modelling shows the North Island carries the greatest exposure and is likely to face the largest impacts, as they have a greater reliance on rainfall and purchased feed."
Mark emphasises that while the dairy sector is in a relatively strong financial position, and is experienced at managing volatility, farm expenses have increased significantly in recent seasons, with the national breakeven milk price already forecast at $8.62/kgMS before allowing for significant El Niño impacts.
“We are not expecting these expenses to fall significantly in the 2027/28 season either. Profit margins are forecast to remain very tight as we look ahead.”
DairyNZ Farm Systems Team Manager Steve Veix says El Niño events do not play out the same way every time, and impacts will differ between regions and farms.
“With greater weather variability expected, the biggest risk for many farmers will be seasonal feed availability. The key is to keep feed budgets up to date, monitor pasture growth and cover, and set clear trigger points for action if conditions get tougher,” says Steve.
“Having a plan in place now gives farmers more options to respond, depending on how El Niño plays out. New Zealand dairy farmers are experienced at managing changing conditions, but acting early is what helps protect feed reserves, autumn pasture cover and longer-term farm performance."
The EconTracker is one of the DairyNZ tools funded by the Milksolids Levy.
Explore the latest figures and analysis including the Quarterly Update at dairynz.co.nz/econtracker and farmers can visit dairynz.co.nz/el-nino for practical farm systems tools and resources to support planning ahead of El Nino in their region.
Media contact
Celine Walters-Gray
Senior Corporate Communications Advisor
p: 027 247 9876
e: celine.walters@dairynz.co.nz
