As the 2024/25 dairy season draws to a close, Australian production is down in key regions and geopolitical uncertainty leaves the global market remaining volatile, according to Maxum Foods’ June Dairy Commodity Update and Rabobank’s 2025/26 Australian Dairy Market Outlook.
The latest quarterly Consumer Price Index (March 2025), from the Australian Bureau of Statistics, showed dairy was the only food category experiencing price deflation.
As household income pressures lead to reduced consumer demand, producers in Australia are struggling with costs, as well as production troubles and an uncertain global market to export to.
Australian production
Severe drought has impacted Australian milk output in southern regions, with the situation expected to worsen despite resilient output through April. Culling increased sharply in May and will deplete herd numbers into the coming season.
Floods impacting NSW will also cut local output, resulting in more milk pulled from Victoria to service northern fresh markets. The Maxum Foods report stated its production outlook has been cut to be down 2 per cent in 2025/26, with a lower spring peak given the reduction in the herd.
The RaboResearch report stated national milk output for the 2024/25 season is slightly down, with production from July 2024 to April 2025 totalling 7.129 billion litres, a 0.1 per cent decline year-on-year.
The organisation expects 2025/26 Australian milk production to be marginally down on the previous season, by -0.4 per cent, with downside risk if seasonal conditions remain predominantly dry.
However, several dairy companies operating in the southern export sector have increased farmgate milk prices due to firmer ingredient and export returns, with benchmark average prices having reached approximately $8.40/kgMS.
The 2025/26 season begins on 1 July, with formal minimum prices for the 2025/26 season across southern Australia of around $9.00/kgMS.
Uneasy footing on the global stage
The latest analysis from Maxum Foods states global market fundamentals have improved overall but are still strongly influenced by tight EU milk and butterfat supplies, from low soil moisture and animal disease.
Maxum’s February report stated “the protectionist trade agenda of the Trump administration may raise further tariff barriers for US trade (in and out) to impact whey protein and cheese markets”, a reality that officially began in April.
While elevated tariffs threatened by the US are on pause, the uncertain duration and extent of trade disruptions to the dairy complex and the wider global economy feeds caution. Meanwhile, large shifts in US fiscal policy and geopolitical agendas will impact financial and commodity markets.
Likewise, Rabobank's 2025/26 Australian Dairy Market Outlook, released by the agribusiness banking specialist’s RaboResearch division, stated the Australian market is looking to the new season with ‘solid fundamentals’, but facing global headwinds caused by trade and economic uncertainty.
RaboResearch senior dairy analyst, Michael Harvey, said the recent tariff measures introduced by the US administration have unsettled many international markets.
“The complexity in global markets – exacerbated by trade turbulence and headwinds in the global economy – could dampen dairy demand both locally and in Australia’s export markets,” said Harvey.
“Australian dairy companies will need to carefully balance the risk of a potential downturn in market performance in both the local consumer market and the commodity market over the course of the 2025/26 season.”
The RaboResearch report stated Australia’s dairy exports to the United States are limited, with less than US$20 million worth of Australian dairy exported to the US in 2024. During that time, Australia imported US$150 million worth of dairy products, mostly cheese, from the US.
However, the report stated a weaker Australian dollar is expected to provide some price support for the country’s dairy exporters.
“At a macro-economic level, the dollar is acting as a shock absorber amid ongoing global uncertainty,” said Harvey.
“Since the US administration’s tariff announcements, the Australian dollar has been on a roller-coaster ride, but nonetheless through May to date it has been trading at least five per cent lower against the US dollar compared with the start of June last year.
“And RaboResearch maintains a 12-month forecast for the Australian dollar to be at USD 0.65, which is below the 10-year average (of USD 0.72) and a positive factor for export returns.”
On the broader global markets though, Harvey said the trade of whey and lactose from the US to China is significant, and at risk of being impacted by the trade war.
“This could potentially create additional opportunities for Australian dairy exporters, though these may be constrained by available export volumes,” he said.
