Australian milk production set for continued decline while global supply surges

Australian milk production is forecast to fall again this season, as ongoing feed shortages and a smaller milking herd in drought-affected areas continue to impact - Rabobank says in newly-released research.

It comes as global milk supply surges, with production increasing across other key dairy-exporting regions across the world.

Rabobank’s latest Global Dairy Quarterly predicts a 1.7 per cent decline in Australian production for 2025/26, dropping to 8.05 billion litres.

The decline follows a 0.7 per cent fall last season and is being driven by drought conditions, feed shortages, and a smaller milking herd, particularly in south-eastern regions.

RaboResearch senior analyst Michael Harvey said production dropped more than five per cent in Victoria’s western districts and that conditions were also tough in eastern Victoria and Tasmania.

National milk output in July, the first month of the new season, was already down by four per cent.

 While some regions have welcomed improved rainfall, Mr Harvey warned that soil moisture is still an issue and feed shortages are expected to persist.

“Positively, though, above-average rainfall is forecast by the Bureau of Meteorology across many regions over the next three months," he said.