The Australian Dairy Industry

The dairy industry is Australia’s fourth largest rural industry. Based on farmgate value of production alone, the dairy industry generated A$4.4 billion in 2018–19. The industry also acts as a major source of employment across regional areas, with approximately 46,200 people directly employed on dairy farms and by dairy companies. Associated transport, distribution, farm services and research and development activities represent further employment associated with the industry.

Most dairy production occurs in south-eastern Australia. However, all states have dairy industries that supply fresh drinking milk to nearby cities and towns. Dairying is a well-established industry across the temperate and some subtropical regions of Australia. A range of high-quality consumer products, including fresh milks, custards, yoghurts and specialty cheeses, are produced in most states.

The manufacturing of dairy commodity products for export has become more concentrated in the south-east of Australia. These products include cheddar and mozzarella cheese and specialised milk powders and butterfats.

Throughout the 1990s the dairy industry experienced strong growth, but this has stalled since deregulation. This period coincided with the latter half of the severe and prolonged Millennium Drought. Increased levels of market and margin volatility have undermined confidence in the outlook for many farmers, who are seeking reliable returns on which to build a longer-term future.

As a result, there has been ongoing consolidation within both dairy farming and dairy processing. The number of dairy farms has continued to fall, down 8.5% in 2018–19 compared to the year prior. While farm numbers have fallen, the average size of farms has increased. The number of large farms and their share of milk production has grown. Meanwhile, the industry has seen continued consolidation among processors and rationalisation has seen the closure of several smaller facilities.

The 2018–19 year proved to be a challenging one for the dairy industry, with milk production contracting 5.7% to 8,795 million litres. A drought across the eastern seaboard and below-average rainfall across most of Australia resulted in a decrease in feed available and a surge in the cost of feed and water. This saw the cost of production grow significantly across all regions and contributed to the decline in milk production.