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18 September, 2025
Milk production set to fall yet again
AUSTRALIAN milk production is set to fall again in the current season as ongoing feed shortages and a smaller milking herd in drought-affected areas continue to have an impact, Rabobank says in newly-released research.
The research comes as global milk supply surges, with production increasing across other key dairy-exporting regions across the world.
In its Quarter three Global Dairy Quarterly, the agribusiness banking specialist’s RaboResearch division forecasts a 1.7 per cent decline in Australian milk production for the full 2025/26 season, to reach 8.05 billion litres.
This follows a 0.7 per cent year-on-year fall in the 2024/25 season, with Australian milk production falling 61 million litres to 8.315 billion litres.
Report co-author RaboResearch senior dairy analyst Michael Harvey said this decline had reflected drought conditions and feed shortages, which had dragged on milk production, particularly across the south-east corner of the country.
“This included the western districts of Victoria, where production dropped more than five per cent,” he said.
“Unfavourable conditions also dragged production lower in eastern Victoria and Tasmania.”
The report said overall July milk production in Australia was down four per cent to start the 2025/26 season, which commenced on July 1.
Mr Harvey said in welcome news, there had been good rainfall in July for many key dairy regions in Australia, helping to ease rainfall deficiencies in drought-impacted areas.
“However, soil moisture is still an issue with more rainfall needed and feed shortages are expected to persist,” he said.
“Positively, though, above-average rainfall is forecast by the Bureau of Meteorology across many regions over the next three months.”
Mr Harvey said very high hay prices were the main pressure point for dairy farmers in local feed markets.
“Strong demand for supplementary feed to bridge winter feed gaps, combined with limited supply, has pushed hay prices higher in 2025,” he said.
“And prices are expected to remain at higher levels for some time.”
The report noted Australian farmgate milk prices for the 2025/26 season are locked in at higher levels than the previous season.
“Across Australia’s southern export region, 2025/26 prices are around 10 per cent higher than last season’s closing prices, at AUD $9.00/kgMS or higher,” Mr Harvey said.
When it comes to dairy exports, the report said Australia had a “solid” season in 2024/25, with exports rising 1.5 per cent on the previous season in volume terms and 12 per cent in value terms.
Mr Harvey said there was a strong surge in the country’s butter exports, which jumped 34.6 per cent on a volume basis to 16,350 metric tonnes, while skim milk powder and whole milk powder also posted double-digit gains in exports.
“In addition, Australian cheddar cheese exports increased 26.4 per cent last season, reaching 30,639 metric tonnes,” he said.
Mr Harvey said in the domestic market, retail prices are edging higher again, following two previous quarters of deflation across local dairy aisles.
In terms of local demand though, Australian consumption of drinking milk was shown to have fallen (by 1.8 per cent) to total 2.34 billion litres in the 2024/25 season, the report said.
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