Lactalis takeover of Fonterra headlines dairy 2025 year in review

A $3.5 billion takeover transformed Australia's dairy landscape in 2025, while communities grappled with factory closures and farmers battled dry conditions in the first half of the year.

A massive $3.5bn deal was the main event in a transformed Australian dairy landscape in 2025, as producers grappled with ongoing dry conditions for the first half of the year.

French dairy giant Lactalis beat out Bega and other competitors to take over Fonterra’s Australian assets. The deal will result in those two processors, plus Saputo, controlling nearly 70 per cent of Australia’s processing capacity.

“On a positive note, Lactalis has paid well, so they obviously see financial opportunity in Australian dairy,” Australian Dairy Farmers president Ben Bennett said.

“The question is, where are they going to get the revenue from for what they’ve paid? Will it be a punch down on farmers, again? Or will they get it from increased market value?”

Opening farmgate milk prices of around $9 were perceived by farmers as “specific lowballing”, Mr Bennett said, but came back to a more respectable level after negotiations.

Processor pain saw Saputo retire the King Island Dairy brand, while Bega shut its Strathmerton factory with the loss of 300 jobs. Meanwhile, South Australian communities grappled with the ramifications of the closure of Beston’s Murray Bridge and Jervois plants in December 2024.

For the second year running Woolworths’ green-and-gold Hillview brand came under fire, this time for using American butter, while negotiations over a long-awaited European Union free trade agreement continued mid-year, with Mr Bennett airing concerns over what it would mean for the industry.

“The EU is the biggest cheese exporter in the world at 1.4 million tonnes. They could quite easily double or triple their cheese exports to Australia with the removal of the tariff,” he said.

“Without it, it could be very frightening.”

United Dairy Farmers of Victoria president Bernie Free said 2025 had been a tough year, with the costs of buying hay amid dry conditions “putting a pretty big hole in everyone’s budget”.

“We have beautiful land for dairy farming throughout Victoria, and yet the financial reward for the amount of work that is involved is not there,” she said.

“On a positive note, we’ve come to the end of spring and we’ve all still got a little bit of grass, and most people are going to end up with a little bit of hay and silage to get them through to the autumn break.”

TALE OF TWO HALVES

Greg Wilson of Oakhampton Dairies at Irrewillipe says 2025 was a tale of two halves at his and wife Kim’s dairy operation in southwest Victoria.

A reasonable harvest in 2024 saw them have quality silage and feed in reserve to tackle the year ahead, before a really long dry spell through autumn put some pressure on the business.

“But then it swung from one of the worst periods I’ve seen to the best,” Greg said.

“We got rain just at the right time from June onwards, from a pasture point of view it wasn’t too wet and wasn’t too cold.”

Running up to 1200 dairy cows across 1000ha, while supplying more than 700,000kg of milk solids a year to Coles, Greg said the business was in a good spot in the lead up to Christmas.

“We’ve still got green grass now, and we haven’t started feeding the cows yet when we usually would have,” he said.