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- Dairy Australia update: Improved farmgate milk prices expected, but climate and operating costs still weigh on farmer sentiment
Dairy Australia update: Improved farmgate milk prices expected, but climate and operating costs still weigh on farmer sentiment
Tuesday, 10 June 2025
The latest Dairy Australia mid-year report forecasts a further reduction in Australian milk production for the upcoming 2025/26 season, by around 1% compared to this season (towards 8.2 billion litres). This estimate comes with the caveat that a continuation of poor weather could cause further decline.
With tighter milk production forecast, the emerging 2025/26 season is expected to bring improved producer prices. Increased demand, both domestically and internationally is also contributing to this upward movement.
Despite the increase in farmgate prices, operating costs remain high. Input costs, particularly those which are exposed to global markets, are becoming more volatile. A reduced appetite for business investment was reported, with the rate of farm exits now higher than ever. Therefore, a contraction of the milk pool was forecast for the upcoming season.
Weather conditions across Australia have varied, with dry conditions in southern regions and wet conditions in parts of the north. The challenging weather has increased reliance on supplementary feed, causing a rise in fodder prices in most regions.
The effects of recent US trade announcements are complex. Some buyers have been drawn to non-US exporting regions such as Oceania, while others have been drawn to the weakened pricing of US dairy products.
Domestically, recent dairy retail performance has shown strength. Due to ongoing inflation and developing social trends, consumers are gravitating towards private label and in home-consumption, though value growth may be limited going forwards.
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