03/06/2026
Strong returns are creating opportunity - but discipline will define the outcome. Read the full article here...
Dairy must capitalise on positive conditions, with broader pressures still in play
Over the past three years the dairy sector has continued to perform strongly.
After a sharp recovery through 2023/24, followed by an exceptionally positive 2024/25 season, the current 2025/26 season is finishing in a similar position. Sustained returns are providing a period of ongoing profitability.
Milk price futures remain supportive, sitting in the high $9 range, with spot pricing testing $10/kgMS at times. At face value, this reinforces expectations of another strong season ahead.
South Canterbury rural professional Tim Croskery says while the opportunity remains clear, the environment continues to evolve.
“Returns are strong, but the landscape around them is shifting. The focus now is how well businesses use this window.”
Strong demand underpinning returns
Global demand remains a key driver of current strength.
Population growth and the expansion of the Asian middle class continue to support long-term consumption trends. More recently, emerging dietary shifts — particularly in the United States — are adding another layer of support.
Increased use of weight-loss medications and the associated move toward higher protein diets is beginning to influence demand for dairy ingredients and red meat proteins. Combined with tight livestock numbers in key markets such as the US, this is contributing to firm pricing across both sectors.
Cost pressures and global uncertainty remain
Despite strong revenues, cost pressures are still evident.
Ongoing geopolitical tension, particularly in the Middle East, continues to influence energy markets. While refined fuel supply chains into New Zealand appear more diversified and stable, pricing remains elevated and volatile.
“As pricetakers at the end of the supply chain, farmers are still absorbing rising costs across fuel, freight and inputs. That pressure shows up quickly.”
This reinforces the importance of disciplined decision-making, particularly around cost control and efficiency.
Domestic economy tracking sideways
Closer to home, the wider New Zealand economy remains subdued.
High living costs, weak productivity growth and cautious business sentiment continue to weigh on activity. Investment decisions are often being deferred, which is typical in the lead-up to an election cycle.
Interest rate expectations remain mixed. While markets have begun to factor in future increases, the softer domestic backdrop suggests a more measured approach in the near term.
Property markets showing a split story
These broader economic conditions are beginning to show up in the residential property market.
Buyer caution has increased, with softer sales volumes and modest downward pressure on pricing evident across many regions over recent months. The market remains relatively stable, but momentum has clearly slowed.
In contrast, rural property markets — particularly across Canterbury — continue to show resilience.
Strong farm cashflows, reduced debt levels and confidence in the outlook are supporting activity, particularly in the dairy sector. Listings in some areas, particularly across Canterbury for dairy and dairy support properties, have remained steady through autumn.
Lifestyle property remains a consistent performer.
Demand continues to hold, likely reflecting both the strength of the rural economy and some reluctance among urban buyers to take on new builds given cost uncertainty.
Positioning for the next phase
Overall, the rural sector remains well supported.
A relatively low New Zealand dollar is helping underpin export returns, while strong global demand continues to support commodity pricing.
However, the broader economic environment reinforces the need for careful ex*****on.
“This is a period where strong cashflows create opportunity, but they also require discipline. The businesses that get their structure and decisions right now will be best positioned for the next phase.”
While headwinds remain, the fundamentals of the rural sector — and its influence on land markets — continue to provide a solid foundation heading into the next season.
