Australian Dairy Industry Faces Challenges – Impact Expected on Consumer Prices

Share this @internewscast.com

In recent years, Australian dairy farmers have encountered increasingly challenging conditions, which may lead to rising prices for consumers.

Consumer advocacy groups have cautioned that milk product prices are anticipated to increase due to potential shortages.

However, dairy farmers argue this might not suffice to rescue the ailing industry.

Why is Australia’s dairy industry facing challenges?

Australian dairy is a $13 billion industry spanning farming, manufacturing and exports, with a farmgate value of $4 billion alone, according to the industry’s peak body Dairy Australia.

Many dairy farms are in Australia south and south-east. After a hot, dry summer, NSW has faced heavy rain and floods, while Victoria, Tasmania and South Australia have been experiencing drought.

In May, Kevin and Doug Schlenert lost their dairy production facilities and 70 percent of their herd to floods on the mid-north coast of NSW.

The brothers said they didn’t know whether they would be able to recover.

“I’ve got no dairy now to keep going. I don’t know which way to turn at the current moment,” Kevin said, speaking with SBS News in the aftermath of the floods.

“I don’t know if I can bounce back from this. I really don’t know.”

According to Dairy Australia’s 2025 mid-year Situation and Outlook report, wet weather in the north and dry conditions in the south, in addition to tightened farm margins, have weighed on milk production across several dairying regions

The report found a decline in farmer confidence in the future, with only half of respondents in the National Dairy Farmer Survey expressing positive views about the industry’s future, compared to two-thirds the previous year.

Dairy Australia reported that fewer than two-thirds of businesses expect to achieve an operating profit, with more than half predicting profits lower than the average of the past five years.

A man in a blue shirt is standing outside in front of cattle.

Ben Bennett, president of the non-profit Australian Dairy Farmers, is concerned about the industry’s future. Source: Supplied / Australian Dairy Farmers

Ben Bennett, a dairy farmer in south-west Victoria and president of Australian Dairy Farmers, which represents dairy farmers across Australia, said he is extremely concerned about the future of the dairy industry.

He said the combination of rising operating costs and weather challenges has put many farmers in an impossible situation.

“We’re in, quite frankly, a world of pain,” he said.

“And it’s going to get a lot worse too as we enter winter.”

Bennett said Australian dairy production has decreased by 25 per cent over the past two decades, while dairy imports from overseas have increased.

He believes Australian dairy production will continue to suffer without government assistance and environmental policies designed to support farmers.

“It would be better for a lot of policies to adhere and listen to local people in that area to maximise environmental opportunity and betterment as opposed to … people who are somewhat removed from that kind of on-the-ground position,” he said.

Dairy companies recently announced their farmgate milk prices for the new financial year — that is, the price paid to farmers per kilogram of milk solids in the raw milk, which is later processed into products.

Prices range between $8.60 to $9.20 a kilo, up slightly on last year, but a number of industry groups said farmers were hoping for more.

Are dairy prices increasing in Australia?

You may have noticed dairy products are becoming more expensive.

Michael Harvey, senior analyst at Rabobank, which focuses on agribusiness, said there was inflation “across the dairy aisle” in 2023 and 2024.

“What consumers would realise is they’re paying a lot more for their dairy products from the supermarket than they were two years ago … milk, butter, cheese, yoghurt, anything you can track,” he said.

“We are at the tail end of a significant price spike for dairy products at a retail level.”

At the peak of the cycle, Harvey said prices increased by 25 per cent for milk and cheese.

Dairy Australia’s report said despite an increase in milk prices, high operating costs will continue to limit profitability for farmers, especially if weather conditions don’t improve.

Harvey said while consumers might be hit with some price increases in the coming months, he does not expect them to be as steep as those recorded in recent years.

“That was very unique — it was record-high commodity pricing, it was record-high farm debt pricing, and that’s what underpinned the need for companies to pass through high costs to consumers.

“It can be a little bit complex, but ultimately it’s about the global price of milk that will ultimately set the direction of pricing for dairy products and farm gate milk price.”

In the aftermath of the NSW floods, Eric Danzi, CEO of EastAusmilk, an industry body representing dairy farmers on the Australian eastern seaboard, warned the destruction could have an impact on supermarket shelves.

“There’s certainly going to be a real shortage of milk and products — how that plays through to consumers I don’t know,” he told Sydney radio station 2GB recently.

“Between the massive floods in NSW now, previous [ex-tropical] Cyclone Alfred, and the drought in Victoria and South Australia, you’re going to have a massive reduction in milk production across Australia.”

Harvey said while the current conditions are devastating for farmers, he does not expect them to lead to significant price increases in the short term.

“It’s not what’s going to drive the farmgate price higher or commodity prices higher, it’s more global fundamentals that matter,” he said.