Australian milk production set for continued decline while global supply surges, according to Rabobank.
Ongoing feed shortages and a smaller milking herd in drought-affected areas continue to impact production, Rabobank says in newly released research.
This comes as global milk supply surges, with production increasing across other key dairy-exporting regions across the world.
In its Quarter 3 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 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 the domestic market, retail prices are edging higher again, Mr Harvey said, 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.