Milk

Dairy Australia provides the latest information regarding milk production sales, drinking milk consumption and yield per cow.

In 2019–20, Australian milk production decreased by 0.2% to 8,776 million litres. Australian milk production remains strongly seasonal in the key south-eastern dairying regions, reflecting the predominantly pasture-based nature of the industry.

Challenges

Over the past 30 years, farm numbers have steadily decreased while the average farm size has grown. This has been due to an increase in cow numbers and improved cow yields, up until the major widespread ‘Millennium drought' in 2002–03. The following decade saw a period of consolidation for the industry, with falling cow numbers and dry seasonal conditions constraining production, particularly in northern Victoria.

In recent years, volatility in farmgate milk prices and farm incomes have impacted farmer confidence and the industry's ability to grow. With the industry disruption caused by the late-season step-downs in 2015–16 and lower average milk prices in 2016–17, many farmers focused on cost control, refinancing and business consolidation, rather than longer term investments to increase production.

In many cases, farmers culled extensively during these years, taking advantage of higher beef prices to maintain cashflow.

The 2019–20 season

The first half of the 2019/20 season proved challenging for many dairy farmers in Australia, with ongoing dry seasonal conditions increasing the cost of feed and water.
However, following a return to more favourable farming conditions in December 2019, Australia’s national milk pool started to recover. Higher rainfall combined with easing input costs and a relatively strong farmgate milk price improved farmer confidence in most regions. This recovery was overshadowed by the COVID-19 pandemic, creating uncertainty in global and domestic markets. 

Dairy farming in Australia

Dairy farming is concentrated in the temperate zone of Australia. Australian milk production remains strongly seasonal in key south-eastern dairying regions, reflecting the predominantly pasture-based nature of the industry. Production peaks in October, tapers off until late-summer, and then flattens out into the cooler winter months. The production of long shelf-life manufactured products in these parts of the country has enabled maximum milk utilisation within the seasonal cycle. However, the seasonality of milk output in Queensland, New South Wales and Western Australia is much less pronounced, due to a greater focus on drinking milk and fresh products. Farmers in these states manage calving and feed systems to ensure flatter, year-round milk production.

Milk production (million litres) by state

Dairy milk supply trends analysis

Analysis of Victorian milk supply trends from 2006 to 2012 shows there has been a clear shift towards increased off-peak production. The Dairy Australia Research Report – Victorian dairy industry milk supply trends: Analysis of the drivers of farm profit – analyses the impact of changes to farm milk supply patterns across Victoria and its impact on farm profit.

Dairy Australia Research Report – Victorian dairy industry milk supply trends: Analysis of the drivers of farm profit.

How can this report help dairy farmers?

The report can help farmers and industry professionals gain a greater understanding of the key drivers of farm profit given increasingly complex farm production systems.

The study was completed using data from the last six years of the Victorian Dairy Industry Farm Monitor Project, including 134 farms from all Victorian regions and 416 sets of farm operational and financial data.

The project report highlights six key findings:

1. Increasing off-peak milk production does not guarantee a flat milk supply curve.
2. Not all farmers have used more intensive supplementary feeding systems in the shift from a highly seasonal milk supply curve to more off-peak and higher plant utilisation.
3. Farm operating cost and return on investment is poorly correlated with off-peak milk production and plant utilisation.
4. The analysis shows that, regardless of off-peak percentage or plant utilisation levels, the most significant factor correlating with farm economics is the proportion of directly grazed pasture in the diet.
5. The data shows that farms with less than 40% grazed pasture in the diet have a high risk exposure to milk price and feed price.
6. The relationships between income, operating cost, margin, capital investment and return are consistent across all regions of Victoria.