Australian dairy farmers are starting the new season under increasing margin pressure, according to Rabobank’s latest Global Dairy Quarterly, even as the broader global market begins to rebalance after a period of intense production growth.
RaboResearch senior dairy analyst Michael Harvey said milk production trends had varied significantly by state over the 2025/26 season, with New South Wales and Queensland the strongest performers and Tasmania also recording solid growth. Overall, national production for the season is expected to finish slightly below last year’s levels, and Rabobank is forecasting a further 0.3 per cent decline in the new 2026/27 season.
New season milk prices have been announced across southern Australia in a range of $8.80 to $9.50 per kilogram of milk solids, slightly below Rabobank’s earlier expectations.
Harvey said rising input costs were the key concern for farmers heading into the new season.
“With cost pressures expected to remain elevated for the foreseeable future and milk prices only close to break even, farm profitability is likely to stay constrained in 2026/27.”
Rainfall remains a key swing factor. Harvey said recent rain had eased soil moisture deficiencies in some regions, but the outlook pointed to below-average rainfall across southern and eastern Australia in coming months, with a risk of El Niño conditions developing later in the year.
“This increases the risk of tighter feed availability,” he said.
Harvey said dairy producers globally would also be watching geopolitical developments closely, including the announced US/Iran peace agreement expected to be signed this week and its impact on the opening of the Strait of Hormuz, given the flow-on effects on oil and energy costs that feed into farm input prices.
At the retail end, dairy price inflation is re-emerging, with major supermarkets lifting shelf prices on private-label milk in response to rising supply chain costs.
“Further price increases across the dairy aisle are likely in the coming months,” Harvey said.
On trade, Australian dairy export volumes for the period from July 2025 to March 2026 were broadly stable year-on-year, though performance varied widely by product. Milk exports rose 17.9 per cent, supported by stronger trade into South-East Asian markets, while butter exports fell 49.5 per cent, butter oil exports dropped 38.2 per cent and cheddar exports declined 18.2 per cent.
The local pressures mirror a broader global trend identified in the report, with Rabobank forecasting that global milk production will move into year-on-year decline by the final quarter of 2026 after a period of record growth, as elevated input costs and tight margins curb output worldwide.
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