Australian dairy market outlook: Solid fundamentals and global headwinds

With the crucial 1 June deadline fast approaching, Australia’s dairy processors must comply with the Dairy Code of Conduct by publicly releasing their minimum milk prices. These pricing decisions will be shaped by market dynamics, which currently appear reasonably sound. Commodity prices and export returns for bulk dairy ingredients have rallied ahead of the new season. Despite domestic dairy market returns facing deflationary pressure, they remain elevated.

However, a complex and uncertain global backdrop cannot be ignored. Dairy companies will face a delicate balancing act when setting new season milk prices on 1 June. While solid fundamentals support higher farmgate prices, these are set against an uncertain global backdrop. Recent tariff measures introduced by the US administration have unsettled many international markets. The complexity in global markets, exacerbated by trade turbulence and headwinds in the global economy, could dampen dairy demand both locally and in Australia’s export markets.

That said, there should be enough confidence to ensure guaranteed minimum prices are higher than the closing levels of the current season, reaching at least AUD 9.00/kgMS.

Yet Australian dairy companies will need to carefully balance the risk of a potential downturn in market performance in both the local consumer market and the commodity market over the course of the 2025/26 season.