6.7% Surge in Global Dairy Trade Price Index: Economic Impact Analysis

Based on my comprehensive research and analysis, here is a systematic evaluation of the 6.7% surge in the Global Dairy Trade (GDT) price index and its potential economic ramifications.

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The Global Dairy Trade price index, operated from New Zealand, recorded a

, with the auction average selling price reaching [1][2]. This represents a significant rebound following a prolonged period of declines from September through December 2025, marking the index’s strongest performance in six years. The price jump was driven primarily by gains in key dairy commodities:

Product	Price Increase
Whole Milk Powder (WMP)	+7.2% to $3,407/tonne
Anhydrous Milk Fat (AMF)	+7.4% to $6,011/tonne
Butter	+5.8%
SMP (Skim Milk Powder)	+4.2%
Cheese	+3.5%

This follows a 6.3% increase recorded at the first GDT auction of 2026 in January, indicating a sustained upward momentum in global dairy prices [3][4].

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New Zealand’s dairy sector stands to benefit significantly from this price surge, given that

, valued at , representing a 21% year-over-year increase [5][6]. Several factors support the positive revenue outlook:

1. Record Export Performance
   : New Zealand’s annual exports hit a record high of
   NZ$80.7 billion (approximately US$49 billion)
   in 2025, with dairy products remaining the top export earner [5][6].

2. Fonterra’s Strong Position
   : Fonterra Co-operative Group, New Zealand’s largest dairy exporter, reported:
   • Profit after tax of NZ$1.15 billion
     for FY2025, an 11% increase year-over-year
   • Normalized earnings per share of 70 cents
     , up 13%
   • 2025/26 farmgate milk price forecast of $9.00-$10.00 per kgMS
     (midpoint $9.50)
   • Total dairy payout estimated at approximately
     NZ$19.5 billion
     for the 2025/26 season [7][8]

3. Strategic Production Focus
   : The industry is shifting toward high-value dairy products:
   • Record cheese exports projected at
     430,000 MT
     (75% destined for China)
   • Butter and AMF exports projected at
     ~515,000 MT
   • Fluid milk exports stable at
     ~255,000 MT
     [4]

With the GDT index surge translating into higher commodity prices, New Zealand’s dairy export revenues for 2026 are projected to increase by

, potentially reaching [8]. The combination of higher prices and strategic product positioning toward premium categories (cheese, butter, AMF) should enhance export values even if volumes remain relatively stable.

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China’s position as the world’s largest dairy importer presents a complex picture for inflationary transmission:

• Import Tariff Reduction
  : China recently reduced import tariffs on EU dairy products from 21.9%-42.7% to
  11.7%
  (and 9.5% for certain brands like Arla and Lactalis), effective February 3, 2026 [9]. This should increase supply and moderate price increases.
• Domestic Oversupply
  : China’s domestic dairy market is experiencing oversupply conditions, with milk prices falling below average production costs [10]. High domestic stocks exert downward pressure on prices.
• Import Decline
  : China has been reducing dairy imports in recent years as domestic production grows toward self-sufficiency [10].

• Feed Cost Pressures
  : Chinese domestic dairy production faces brutal cost conditions, with corn exceeding
  $10 per bushel
  and imported hay at
  $500 per tonne
  at ports [11].
• Food Price Inflation
  : China’s food prices rose
  1.1% year-on-year in December 2025
  , the strongest pace since October 2024, driven by fresh vegetables (18.2%) and fresh fruit (4.4%) [12].
• Demand Recovery
  : While dairy product prices fell 1.7% year-on-year in October 2025, the rate of decline has been moderating [12].

: The inflationary impact from the GDT surge will likely be due to domestic oversupply and tariff reductions, though feed cost pressures and broader food inflation could partially offset this.

Southeast Asian markets face

due to structural factors:

Factor	Impact Level
Import Dependency	Southeast Asia relies on imports for 65% of its dairy consumption
Limited Domestic Production	Tropical climate constraints limit local dairy farming expansion
Price Sensitivity	Higher proportion of dairy in household food budgets for lower-income consumers
Growing Demand	Rapid urbanization and changing dietary patterns drive consumption growth

According to industry forecasts,

, with supply management helping to limit volatility [13]. However, the 6.7% GDT surge could push this higher, particularly for:

• Infant formula
  : Already subject to supply chain constraints
• Processed dairy products
  : Butter and cheese used in food service sector
• Liquid milk
  : Essential commodity with limited substitutes

: potential increase in dairy product prices, representing a moderate inflationary pressure that could contribute to broader food inflation in the region.

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The chart above illustrates the easing trend in Asia ex-Japan CPI, indicating that food inflation pressures have been cooling through 2025. However, the GDT price surge represents an upward pressure that could reverse this trend in dairy-dependent economies.

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• The EU-China anti-subsidy investigation into EU dairy (ongoing until February 2026) adds uncertainty for European exporters, potentially benefiting New Zealand suppliers in the Chinese market [9][10].
• China’s tariff reduction on EU dairy represents a de-escalation in trade tensions that could increase competitive pressure on New Zealand exporters [9].

• New Zealand milk production is projected at
  21.9 MMT
  for 2026, slightly below the 2025 record but still supportive of strong export volumes [4].
• The global milk market entered 2026 with oversupply conditions, though the GDT price surge suggests demand recovery [10].

• With China’s imports contracting, exporters are shifting focus to
  North Africa, the Middle East, and Southeast Asia
  [10].
• Chinese dairy giants Yili and Mengniu are expanding operations in Indonesia and Vietnam, targeting local consumers and broader Southeast Asia markets [14].

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1. New Zealand Export Revenue Impact
   :
   Positive and significant
   — The 6.7% GDT price surge is expected to boost New Zealand’s dairy export revenues by
   8-12%
   in 2026, potentially reaching
   NZ$26-27 billion
   . Fonterra’s strong profitability and elevated milk price forecasts support this outlook.

2. China Inflationary Impact
   :
   Limited to moderate (1.5-2.5%)
   — The combination of domestic oversupply, import tariff reductions, and high inventory levels will likely constrain the pass-through of higher dairy prices to Chinese consumers.

3. Southeast Asia Inflationary Impact
   :
   Moderate to significant (3.5-4.5%)
   — Higher import dependency and limited domestic production capacity make Southeast Asian markets more vulnerable to GDT-driven price increases.

4. Overall Assessment
   : The GDT price surge represents a favorable development for New Zealand’s agricultural economy while posing modest inflationary risks for importing nations, particularly in Southeast Asia. The impact will be moderated by trade policy adjustments, domestic supply conditions, and ongoing global dairy market dynamics.

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[1] Dairy News Today - “Global Dairy Trade Index Rises by 6.3% at First 2026 Auction” (https://dairynews.today/news/global-dairy-trade-index-rises-by-6-3-at-first-2026-auction.html)

[2] Farm Online - Dairy Trade Index Analysis (https://www.farmonline.com.au/images/transform/v1/crop/frm/8yYKiJXq2Ks3fRrBZY5gaD/4cd89bc1-339a-4321-ac28-0e7eb88bacc0.jpg)

[3] The Bottom Line NZ - “Dairy prices jump 6.3% in first GDT auction of 2026” (https://www.thebottomline.co.nz/dairy-prices-jump-6-3-in-first-gdt-auction-of-2026-wall-st-keeps-rallying/)

[4] Dairy Reporter - “Global dairy market outlook 2026: Production and trade trends” (https://www.dairyreporter.com/Article/2026/01/08/global-dairy-market-outlook-2026-production-trade-trends/)

[5] Xinhua - “New Zealand exports hit record high in 2025” (https://english.news.cn/20260129/d2140a8607bf4676a9190d12a0392d81/c.html)

[6] Xinhua - “New Zealand exports hit record high in 2025” (http://www.xinhuanet.com/english/asiapacific/20260129/cb66823bbc8a4bab9403c7b56a44807e/c.html)

[7] Fonterra - “Fonterra provides FY26 Q1 business update” (https://www.fonterra.com/sea/en/our-stories/media/fonterra-provides-fy26-q1-business-update.html)

[8] Infometrics - “New Zealand Dairy Payout Quarterly Economic Monitor” (https://quarterly.infometrics.co.nz/new-zealand/economic/dairy-payout)

[9] Dairy Business MEA - “China lowers tariffs on EU dairy imports to 11.7%” (https://dairybusinessmea.com/2026/02/03/china-lowers-tariffs-on-eu-dairy-imports-to-11-7/)

[10] Foodcom - “Milk market overview 2026 - Global Report” (https://foodcom.pl/en/global-report-milk-market-overview/)

[11] The Bullvine - “China Extends Dairy War to February 2026” (https://www.thebullvine.com/news/china-extends-dairy-war-to-february-2026-how-this-trade-siege-is-hitting-your-bottom-line/)

[12] Trading Economics - “China Food Prices Rise the Most in 14 Months” (https://tradingeconomics.com/china/food-inflation/news/515702)

[13] South Asian Post - “Why Food Prices are Set to Soar in 2026” (https://www.southasianpost.com/article/8781-why-food-prices-are-set-soar-2026.html)

[14] Industry Sourcing - “Outlook 2026: The China-Southeast Asia connection” (https://www.industrysourcing.com/article/Outlook-2026-The-China-Southeast-Asia-connection)