19 June 2025

3 minute read

By: Global Ag Media

Oceania

Australia’s milk production in 2025 is estimated to decline by less than one percent to 8.6 million metric tons (MMT), following a notable 2.4% increase in 2024—the first significant rise since 2020, according to FAS/Canberra. The upward momentum seen in 2024 has stalled, primarily due to very dry conditions across southwest Victoria and South Australia, which began in 2024 and have persisted through the first four months of 2025. The modest decline in production is being cushioned by continued strong farmgate milk prices and lower feed grain costs.

Domestic fluid milk consumption in 2025 is projected to decrease by 0.4% to 2.435 MMT. Although this marks a decline after a slight increase in 2024, it reflects a return to the longer-term trend of declining consumption. Australia’s recent population growth, which is now beginning to moderate, is expected to temper the rate of decline, which has averaged around one percent annually. However, per capita consumption continues to fall at a rate of approximately 2% per year.

In 2024, consumer preferences continued to shift back toward full-fat milk, a trend that began in 2023, while demand for Ultra-High Temperature (UHT) and reduced-fat milk declined. Flavoured milk consumption remained flat, and no-fat milk saw a slight decrease. Factory-use milk consumption in 2025 is expected to decline by 1.2% to 5.988 MMT, mainly due to the overall reduction in milk production.

With a small decline in factory-use milk consumption estimated for 2025, the production of manufactured products is expected to also decline marginally from the prior year. Cheese and skim milk powder (SMP) production is estimated to decline slightly while butter and whole milk powder (WMP) expected to remain steady, albeit at historically low levels. Dairy processors are expected to continue prioritising cheese production to maximise economic returns, with approximately 53% of factory-use milk allocated to cheese manufacturing.

Fluid milk exports are estimated to increase by 9.5% in 2025, following consecutive declines from 2022 to 2024, supported by signs of strengthening demand to China and Malaysia early in the year.

Cheese exports are also expected to rise, building on strong export momentum in the first quarter of 2025. By contrast, SMP and WMP exports are projected to ease, after elevated levels in 2024 driven by weak export volumes in 2023. Butter exports are expected to remain stable. Export volumes across all major dairy commodities were subdued in 2023 due to reduced international competitiveness, as high farmgate prices—driven by strong competition for milk by dairy processors—exceeded global parity.

Improved global prices in 2024, along with carryover supply from the previous year, contributed to elevated exports for 2024, with 2025 expected to reflect a return to more balanced conditions. Cheese imports are projected to increase in 2025 to support the expected rise in exports, despite a slight decline in domestic production. Imports of WMP are also expected to rise, while butter and SMP import volumes are anticipated to remain stable.