Australia’s dairy sector remains resilient as Dairy Australia projects 8.3 billion litres of milk output in 2025–26 despite severe drought in Victoria and floods in New South Wales. However, the industry faces mounting pressure from climate volatility, weak farmgate prices, and rising costs, raising uncertainty over long-term sustainability.
Dairy Australia, the national body supporting Australia’s dairy industry, has forecast milk production to reach 8.3 billion litres for the 2025–26 season, showcasing the sector’s resilience despite ongoing climate disruptions and economic headwinds. The organization provides strategic leadership, research, and support to over 4,000 dairy farms across the country.
The forecast, released on May 29, 2025, highlights a stable outlook in the face of severe drought in Victoria and recent floods in New South Wales, Australia’s two primary dairy-producing states. According to Dairy Australia’s industry analyst Eliza Redfern, the estimate is based on current conditions but warns of a possible 0–2% decline, potentially reducing output to as low as 8.1 billion litres.
Victoria, often dubbed the dairy capital of Australia, has faced persistent drought, straining water supplies and affecting pasture growth. Meanwhile, New South Wales has struggled with flood-induced damages to farm infrastructure and milk logistics. These contrasting conditions underscore the growing climate volatility impacting Australian agriculture.
The challenges go beyond climate. Farmgate prices—what farmers earn per litre of milk—have remained subdued. Coupled with inflation and supply chain disruptions, many farmers are hesitant to expand operations or invest in herd growth. “There is a lower appetite for farm business growth due to economic and climatic factors,” said Redfern, pointing to the tightrope farmers must walk between production costs and returns.
Australia’s dairy output hit a recent low of 8.125 billion litres in 2022–23, not far from the current projection. Although dairy production has repeatedly shown strength in adversity, industry leaders warn that continued financial pressure and climate extremes could cause long-term contraction.
Policymakers and industry stakeholders now face the challenge of reinforcing dairy resilience through targeted support, financial incentives, and climate adaptation programs. While the Australian government has pledged to implement climate resilience strategies, their effectiveness amid worsening conditions remains uncertain.
As Australia’s dairy sector moves forward, the balance between maintaining output and navigating environmental and economic complexities will be key. The next few years may determine whether resilience alone is enough to sustain the country’s dairy legacy.
