Australian milk pool 2025-26: Price and drought risk productivity

Dairy Australia says the national milk pool will be stable this season and next. But some are questioning that optimistic outlook.

Drought and floods enveloping more than half of all Australia’s dairy farms are set to evaporate the milk pool this financial year and suck millions of litres out next season.

Industry analysts and farmers say a Dairy Australia forecast of 8.3 billion litres this season was optimistic, given widespread drought across much of Victoria, South Australia and Tasmania as well as the NSW floods.

The smallest milk pool in recent seasons was the 2022-23 financial year at 8.125 billion litres, the lowest since the 1994-95 season when a cocktail of drought and floods in different parts of the nation reduced output to 8.2 billion litres.

Bendigo Bank Agribusiness senior insights manager James Maxwell said while the current season was set to clock in between 8.3 billion litres, the 2025-26 figure was one of decline.

“When you look at the upcoming season, it’s starting on the back foot. There’s lower herd numbers as farmers shed stock and fodder costs are higher due to drought.

“Also, there’s the attraction of strong property prices for farmers looking to retire or exit the industry, plus there’s that transition for some into beef or another commodity.”

Australian Dairy Farmers president Ben Bennett said a 0 to 2 per cent cut to the 2025-26 national milk pool was optimistic.

However, he welcomed Dairy Australia’s openness to revising the forecast as more information came to hand on the dual impact of floods and drought.

“We’re talking about the worst season for dairy in living memory. We welcome a fresh look at the milk pool forecast because it’s one of the indicators for the health of the dairy industry,” Mr Bennett said.

South Australian Dairyfarmers Association president Robert Brokenshire said Australia’s milk pool could stabilise next season if processors paid at least $9.50 per kilo milk solids at the farmgate.

“South Australia has endured its worst drought in 100 years. Yet despite this, our milk production figures have remained stable and that’s mainly due to exceptional use of fodder,” Mr Brokenshire said.

“As we know, fodder prices are sky high and have eaten away any margin the farmer was making. So the processors need to do the right thing, as good corporate citizens, and pay a fair price at the farmgate.

“Below $9, farmers are making a loss. Between $9 and $9.50, they’re barely making a profit, so getting to at least $9.50 per kilo milk solids is crucial to maintaining the milk pool.”

Last month, Dairy Australia outlined an 8.3 billion litre forecast but industry analyst Eliza Redfern acknowledged the projected figure was subject to change.

Ms Redfern also outlined a cut to next season’s national production figure.

“We are expecting national milk production to drop between 0 and 2 per cent in the (2025-26 financial year) which would mean a milk pool between 8.1 and 8.3 billion litres,” she said.

“It is a rapidly developing situation and we update our forecasts as more information comes to light.”