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Monday, Jun 09, 2025
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Challenges Mount for Australia's Dairy Industry Amid Climatic Turbulence
Australian dairy farmers confront rising costs, severe weather impacts, and diminishing production as consumer prices rise.
Australia's dairy sector, valued at approximately $13 billion, has been experiencing significant turbulence, impacting both farmers and consumers.
With a farmgate value of about $4 billion, the industry encompasses farming, manufacturing, and exports.
Dairy farms predominantly situated in the southeastern regions of the country have become increasingly vulnerable due to a volatile climate.
While New South Wales has faced heavy rainfall and flooding following a notably hot and dry summer, states like Victoria, Tasmania, and South Australia are grappling with severe drought conditions.
Notably, in May, the Schlenert brothers, dairy farmers in New South Wales, reported devastating losses with the destruction of their dairy production facilities and 70% of their herd due to flooding.
Kevin Schlenert expressed uncertainty about the future of their operations, highlighting the critical challenges farmers face in recovery efforts.
According to Dairy Australia's 2025 Situation and Outlook report, the reality of fluctuating weather patterns has led to a decline in milk production across various regions.
The report noted a marked decrease in farmer confidence, with only half of those surveyed maintaining a positive outlook for the industry's future, a stark decline from two-thirds the previous year.
The financial outlook is similarly bleak, with less than two-thirds of businesses expecting an operating profit, while more than half anticipate profits will drop below the average of the previous five years.
Ben Bennett, president of Australian Dairy Farmers and a farmer in Victoria, voiced significant concern regarding these trends.
He emphasized that rising operational costs combined with unpredictable weather leaves many in precarious positions.
The production of dairy in Australia has decreased by 25% over the past two decades, with imports rising substantially, raising concerns about the sustainability of local production.
Dairy companies recently announced farmgate milk prices for the new financial year, ranging from AUD 8.60 to AUD 9.20 per kilogram of milk solids.
While this represents a slight uptick from the previous year, many farmers had hoped for higher payments due to inflated costs.
Consumer prices for dairy products have been notably affected, with analysts reporting a significant rise in retail prices for milk, cheese, butter, and yogurt.
In particular, some dairy products have seen price increases of up to 25% in the current cycle.
Although higher milk prices could benefit farmers, Dairy Australia's report warned that elevated operating costs may continue to hinder profitability unless weather conditions improve.
Industry analysts suggest that while consumers may experience further price increases, they are not expected to match the significant hikes observed in recent years.
Eric Danzi, CEO of EastAusmilk, warned that the recent climatic events could lead to tangible shortages in dairy products on supermarket shelves.
He referenced the combination of floods in New South Wales along with the impacts of Cyclone Alfred and ongoing droughts in Victoria and South Australia as key factors contributing to diminished production levels.
Despite the pressing challenges for farmers, analysts caution that global market fundamentals will play a critical role in shaping future dairy pricing dynamics rather than the local conditions alone.
With a farmgate value of about $4 billion, the industry encompasses farming, manufacturing, and exports.
Dairy farms predominantly situated in the southeastern regions of the country have become increasingly vulnerable due to a volatile climate.
While New South Wales has faced heavy rainfall and flooding following a notably hot and dry summer, states like Victoria, Tasmania, and South Australia are grappling with severe drought conditions.
Notably, in May, the Schlenert brothers, dairy farmers in New South Wales, reported devastating losses with the destruction of their dairy production facilities and 70% of their herd due to flooding.
Kevin Schlenert expressed uncertainty about the future of their operations, highlighting the critical challenges farmers face in recovery efforts.
According to Dairy Australia's 2025 Situation and Outlook report, the reality of fluctuating weather patterns has led to a decline in milk production across various regions.
The report noted a marked decrease in farmer confidence, with only half of those surveyed maintaining a positive outlook for the industry's future, a stark decline from two-thirds the previous year.
The financial outlook is similarly bleak, with less than two-thirds of businesses expecting an operating profit, while more than half anticipate profits will drop below the average of the previous five years.
Ben Bennett, president of Australian Dairy Farmers and a farmer in Victoria, voiced significant concern regarding these trends.
He emphasized that rising operational costs combined with unpredictable weather leaves many in precarious positions.
The production of dairy in Australia has decreased by 25% over the past two decades, with imports rising substantially, raising concerns about the sustainability of local production.
Dairy companies recently announced farmgate milk prices for the new financial year, ranging from AUD 8.60 to AUD 9.20 per kilogram of milk solids.
While this represents a slight uptick from the previous year, many farmers had hoped for higher payments due to inflated costs.
Consumer prices for dairy products have been notably affected, with analysts reporting a significant rise in retail prices for milk, cheese, butter, and yogurt.
In particular, some dairy products have seen price increases of up to 25% in the current cycle.
Although higher milk prices could benefit farmers, Dairy Australia's report warned that elevated operating costs may continue to hinder profitability unless weather conditions improve.
Industry analysts suggest that while consumers may experience further price increases, they are not expected to match the significant hikes observed in recent years.
Eric Danzi, CEO of EastAusmilk, warned that the recent climatic events could lead to tangible shortages in dairy products on supermarket shelves.
He referenced the combination of floods in New South Wales along with the impacts of Cyclone Alfred and ongoing droughts in Victoria and South Australia as key factors contributing to diminished production levels.
Despite the pressing challenges for farmers, analysts caution that global market fundamentals will play a critical role in shaping future dairy pricing dynamics rather than the local conditions alone.
