Domestic price of milk

IBISWorld forecasts the domestic price of milk to drop 6.1% during 2024-25, to total 69.6 cents/litre. This is set to be driven by rising global production and uncertainty around global demand amid weak economic conditions, which is constraining world dairy export prices. However, this fall is expected to be somewhat constrained by ongoing falls in domestic milk production, as the industry continues to consolidate amid rising cost pressures.

Farmgate milk prices in Australia are driven by both global and local market conditions. Robust global demand over much of the past five years has supported a lift in global dairy prices, which has flowed through to higher domestic milk prices. However, initial weak global demand conditions due to uncertainty around the pandemic and rising domestic production led to lower farmgate milk prices in 2020-21. Falling local milk production has also acted to drive prices higher over the past five years. A slump in domestic milk supply, along with rising global demand saw domestic milk prices jump over 40% over the two years through 2022-23.

The Dairy Industry Code of Conduct introduced by the Federal Government, came into force in January 2020. The aim of the code is to ensure greater price transparency between farmers and processors. This includes the prevention of retrospective price step downs and the introduction of a dispute resolution process. The code has placed upward pressure on milk prices over the past five years. Additionally, severe flood events across key dairy farmign regions in 2022 led to a significant decline in domestic milk production, contribtuing to sharp price rises. These prices were boosted further by growing global demand and a depreciating Australian dollar in 2021-22 and 2022-23, making exports more price competitive. Overall, IBISWorld forecasts domestic milk prices to increase at a compound annual rate of 4.2% over the five years through 2024-25.