Domestic price of milk

IBISWorld forecasts the domestic price of milk to climb 8.5% during 2025-26, to total 70.5 cents/litre. This is set to be driven by ongoing falls in domestic milk production, as the industry continues to consolidate amid rising cost pressures. According to ABARES, milk production is set to drop to a three-year low during 2025-26, ramping up competition for supply among dairy product processors.

Farmgate milk prices in Australia are driven by both global and local market conditions. Robust global demand over much of the past five years has supported a lift in global dairy prices, which has flowed through to higher domestic milk prices. However, initial weak global demand conditions due to uncertainty around the pandemic and rising domestic production led to lower farmgate milk prices in 2020-21. Falling local milk production has also acted to drive prices higher over the past five years. A slump in domestic milk supply, along with rising global demand saw domestic milk prices jump over 40% over the two years through 2022-23. Prices have fallen from these highs, supported by higher global and domestic milk production over the two years through 2024-25.

The Dairy Industry Code of Conduct introduced by the Federal Government, came into force in January 2020. The aim of the code is to ensure greater price transparency between farmers and processors. This includes the prevention of retrospective price step downs and the introduction of a dispute resolution process. The code has placed upward pressure on milk prices over the past five years. Additionally, severe flood events across key dairy farming regions in 2022 led to a significant decline in domestic milk production, contributing to sharp price rises. These prices were boosted further by growing global demand and a depreciating Australian dollar in 2021-22 and 2022-23, making exports more price competitive. Overall, IBISWorld forecasts domestic milk prices to increase at a compound annual rate of 5.9% over the five years through 2025-26.