Milk production

Total milk production is forecast to dip by 0.3% during 2025-26, reaching 8,316.5 megalitres. This is despite ABARES flagging a 0.6% hike in milk yields (litres per cow) compared to the prior year. Changes in weather patterns impact pasture quality, which in turn affects milk collection. Weather influences milk production in several ways. Low rainfall limits the feed available for dairy farmers, often leading to reduced dairy cattle numbers. In addition, it affects the quality of pasture feed and, therefore, the average milk yield per cow. Furthermore, dairy cows are among the most heat-sensitive livestock, experiencing significant stress when temperatures rise above 23 degrees Celsius. This heat stress can reduce milk yields.

The national milking herd has declined over the past five years, contributing to varying milk production. ABARES anticipates a further reduction in dairy cow numbers in 2025-26, which the bureau expects to result in reduced milk production. This reduction is driven by continued farm exits and the persistent high costs that dairy farmers face, with some instead electing to transition to beef production because of rising cattle prices and volatile farmgate milk prices. While milk yields, measured in litres per cow, are lifting relatively steadily, wet conditions affecting pasture quality, rising input costs and high land values, which heighten costs of possible expansion, are expected to negatively influence milk production . Farmers tend to reduce the number of dairy cattle when farmgate milk prices do not cover the cost of keeping cattle. Conversely, rising farmgate milk prices encourage herd expansion, typically increasing national milk production.

Previously, difficult climate conditions severely restricted herd sizes, negatively affecting milk production over the two years through 2019-20. China's milk production increased by approximately 4% in 2021-22, following herd expansion and improved milk yields. As China represents a key destination for Australian liquid milk exports, weaker demand from this market combined with greater overseas demand for Australian live dairy cattle, led to a decline in milk production in 2021-22. Favourable weather conditions and stronger farmgate milk prices temporarily supported increased milk production in 2023-24, before lower prices and further declining cattle herds, according to ABARES, lowered production once again in 2024-25 and 2025-26. Overall, IBISWorld forecasts total milk production to decrease at a compound annual rate of 1.3% over the five years through 2025-26.