Dairy Australia has released its mid-year 2025 Situation and Outlook report, acknowledging strengthening export prices and growth in the domestic retail market have helped inject value back into the supply chain.
During 2024-25, farmers have been hampered by wet conditions in the north and dry conditions in the south, although recent rains have helped ease some of the burden in the drier areas of the southern basin.
From a supply perspective, Australia is on track to maintain a national milk pool of 8.3 million litres, however, concerns around climate, input costs and milk prices have increased.
Dairy Australia is forecasting the 2025-26 milk pool to decrease slightly to around 8.24 billion litres, although this will depend on access to affordable irrigation, seasonal conditions and input costs.
According to the 2025 National Dairy Farmer Survey, 55 per cent of farmers are feeling positive about the industry’s future and 71 per cent feel positive about their own future (both of which have dropped since 2024).
Climate for the past five years has remained the greatest concern nationally, and this year, 69 per cent of businesses have been impacted by extreme weather.
Only 18 per cent of businesses are reported to be in an expansion phase and high operating costs including temporary water prices, global fertiliser prices and an unstable export market with rising volatility have contributed to concerns.
The survey found business positivity is at its lowest point in five years.
Confidence is slightly higher among farmers in NSW, subtropical and Western Australian respondents, while significant declines are evident in South Australia and the Murray, western and Gippsland areas of Victoria.
Less than two thirds of farmers are expecting to make an operating profit for 2025, with 57 per cent of the industry expecting profits to be lower than the past five years.
Western Victoria
Dry conditions, limited pasture growth, increased reliance on purchased feed and lack of stock and domestic water have weighed heavily on milk production.
The region’s herd has contracted, with some farmers choosing to offload early in preparation for a tough season, while others have tailored herd sizes post-spring as challenges mounted.
Fodder costs have risen substantially, with many farmers moving to by products including almond hulls to fill the feed gap.
Competition for land from forestry has seen some farmers exit the industry.
Improved weather conditions and cow numbers could see an increase in numbers for the coming season, however it is expected less farms and smaller herds is the most likely outcome.
Gippsland
Production continued to grow in 2024-25, although end-of-season pressures did mount in the final months, with the region bypassing most of the weather challenges until December.
Production was supported by farmers with access to irrigation in the Macalister District.
While there have been some farm exits, several were purchased by existing dairy operations.
Dry conditions in the latter part of the year increased culls, and it is expected production for the 2025-26 season will ease.
High farm land values are also deterring entrants in the most expensive dairying region of the country.
Northern Victoria
Milk flow in northern Victoria has continued to grow, most likely supported by investment in cow housing and other measures, in addition to the added benefit of irrigation.
Herd growth has balanced out any farm exits which may have occurred, although increasing irrigator costs due to water availability and channel access have had an impact.
Continued pressure on water prices may lead to further exits and production is likely to track steady or slightly below for the coming season.
NSW
NSW is likely to be the only state to end the season with production growth, however it has not been devoid of challenges.
Access to irrigation in the southern part of the state has driven growth, while extreme weather conditions in the north due to cyclone Alfred has been an absolute nightmare for some farmers in the north.
Farm exits have been retained within the industry and there have even been some new entrants.
Strong investment from key producers has driven growth, and depending on irrigation availability and pricing, there is potential for growth in the coming season.
Queensland
Wet conditions, especially in the far north, have impacted animal health, pasture growth and feed quality.
Southern Queensland managed to escape severe floods. Several farmers in a winding down stage have stayed in the industry longer than expected, and there has been some appetite to invest in infrastructure.
These investments may support production next season, however decreasing herd size and less farmers will limit growth. Milk volume is expected to track steady or slightly down.
South Australia
Extreme dry conditions and changes in the processing landscape have impacted on sentiment.
Some farmers have dried their cows off early to help limit production costs and the state’s volume has been easing since December.
Many farmers under contract are due to expire June 30, and if difficult weather conditions continue, this could lead to some exits. It is predicted production will continue to ease in 2025-26.
Western Australia
Milk production has been tracking down despite favourable weather conditions.
Backlogs from 2023-24 season have been resolved, however this has left the state with a significantly smaller herd – eight herds have converted to beef as part of retirement plans.
The milk pool is estimated to sit around 300-350 million litres if weather remains stable and farm exits slow.