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Business Environment Profiles - Australia

Milk production

Published: 31 July 2024

Key Metrics

Milk production

Total (2025)

8229 Megalitre

Annualized Growth 2020-25

-1.3 %

Definition of Milk production

This report analyses the total volume of fluid milk each financial year. Fluid milk production can be separated into milk used for drinking and milk used to manufacture dairy products, like cheese, yoghurt, butter and milk powder. The data for this report is gathered from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) and is measured in megalitres per financial year.

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Recent Trends – Milk production

Total milk production is forecast to fall by 1.4% during 2024-25, reaching 8,229.1 megalitres. This follows a fall in milk yields (litres per cow) compared to the prior year. Changes in weather patterns impact pasture quality, which in turn affects milk collection. ABARES anticipates a decline in dairy cow numbers in 2024-25, which is expected to reduce milk production. This reduction is driven by continued farm exits and the persistent high costs, with some farmers transitioning to beef production because of rising cattle prices and falling farmgate milk prices. While milk yields remain relatively stable, wet conditions affecting pasture quality, rising input costs and high land values are expected to further influence milk production.

The national milking herd has declined over the past five years, contributing to varying milk production. This downsizing can also affect production efficiency and increase costs per unit of milk because of reduced economies of scale. Supply chain adjustments may also be necessary, affecting milk collection. Farmers tend to reduce the number of dairy cattle when farmgate milk prices do not cover the cost of keeping cattle. Conversely, rising farmgate milk prices encourage herd expansion, typically increasing national milk production. Weather also influences milk production in several ways. Low rainfall limits the feed available for dairy farmers, often leading to reduced dairy cattle numbers. In addition, it affects the quality of pasture feed and, therefore, the average milk yield per cow. Furthermore, dairy cows are among the most heat-sensitive livestock, experiencing significant stress when temperatures rise above 23 degrees Celsius. This heat stress can reduce milk yields.

Difficult climate conditions severely restricted herd sizes, negatively affecting milk production over the two years through 2019-20. China's milk production increased by approximately 4% in 2021-22, following herd expansion and improved milk yields. With China representing a key destination for Australian liquid milk exports, weaker demand from this market and greater overseas demand for Australian live dairy cattle contributed to a decline in milk production in 2021-22. However, favourable weather conditions and strong farmgate milk prices supported increased milk production in 2023-24. Overall, IBISWorld forecasts total milk production to decrease at a compound annual rate of 1.3% over the five years through 2024-25.

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5-Year Outlook – Milk production

Milk production is forecast to decrease by 1.4% during 2025-26, totalling 8,117.6 megalitres. The...

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