Dairy Sector Facing “Limited Margin for Error”

Australian dairy producers are heading into the new season under increasing financial pressure, with Rabobank warning many farms are operating close to break-even levels.

In its latest Australian Dairy Outlook report, the bank says rising costs for fuel, fertiliser, water, labour and interest rates are continuing to erode confidence across the sector.

Rabobank analyst Michael Harvey says recent improvements in seasonal conditions and dairy commodity prices have not been enough to fully offset mounting input costs.

The report says fertiliser and fuel prices have risen sharply amid ongoing instability in the Middle East, while water allocation prices in the Southern Murray-Darling Basin have more than doubled over the past year.

National milk production is forecast to decline by one-point-two per cent next season, marking a third consecutive annual contraction for the industry.

Rabobank says producers will need disciplined cost management and careful planning in the year ahead, with resilience expected to remain the sector’s key focus