A decline in the national dairy herd will contribute to lower milk volumes, according to the latest ABARES agricultural commodities report released on September 2.
The Australian Bureau of Agricultural and Resource Economics and Sciences points to a fall in volume of about one per cent this financial year.
However the report notes a higher farmgate milk price this year, forecasting value of production to rise by seven per cent.
The industry is, however, facing subdued export prices due to increasing global production and restricted global demand.
Farmgate milk prices are forecast to rise to 70.5 cents per litre in 2025–26, up by 8% from 2024–25, to be just below the 5-year average in real terms.
Prices are expected to rise as milk supply tightens – reflecting a decline in domestic milk production while domestic demand for market milk is expected to remain stable. The forecast value of milk production in 2025–26 has been revised up by $0.2 billion since the June 2025 Agricultural Commodities Report.
Despite an expected rise in the value of milk production, the value of Australian dairy exports is forecast to fall by 7% to $3.5 billion in 2025–26 from record highs in 2024–25 This reflects both falling export volumes and prices across all major exported Australian dairy commodities .
While lower export volumes are consistent with expected lower milk production, export prices are expected to fall given relatively strong global exportable supply:
- Whole milk powder export values are forecast to fall by 15% to $406 million.
- Skim milk powder export values are forecast to fall by 11% to $686 million.
- ·Cheese export values are forecast to fall by 4% to $1.2 billion.
- Butter export values are forecast to fall by 1% to $189 million.
Milk powder export values are expected to fall by more than other dairy exports given lower Australian export volumes as well as falling global prices (given increased global production from key powder producers such as New Zealand and subdued demand in key milk powder export destinations).
By contrast, the falls in the export values of high-milkfat products are expected to be less significant due to relatively low production of milkfats in Europe, which is expected to support butter and cheese prices relative to milk powders.
The forecast value of dairy exports in 2025–26 is $0.1 billion higher than the June 2025 Agricultural Commodities Report, due to an upwards revision in export prices given recent price data.
Domestic prices to rise but export prices to fall
While rising, farmgate milk prices are forecast to remain below the historical highs seen in 2022–23.
Processor competition to secure milk volumes in 2025–26 is expected to be lower than in 2022–23, given weaker consumer confidence in overseas markets and lower expected global prices.
The farmgate milk price has been revised up from the 68 cents per litre in the June 2025 Agricultural Commodities Report following the announcements of milk prices and step-ups in June and July 2025.
The ABARES report said global export prices are expected to fall in 2025–26 as trade uncertainties and macroeconomic pressures weigh on global demand.
Low domestic consumption from China, driven by constrained economic growth, is expected to reduce demand for imported dairy. In addition, global supply, driven by production in New Zealand and the United States, is expected to rise.
Butter prices are expected to fall only marginally, supported by robust demand for milkfat relative to other milk solids, and continued effects of biosecurity incidents in the northern hemisphere, reducing exportable milk supply.