National milk production is forecast to ease by about 2% in the 2025–26 season, down to about 8.15bn litres. This will be driven by a smaller herd, farm exits and persistent cost pressures despite improved seasonal conditions in some regions.

Feed costs have eased slightly thanks to spring rain, but fodder and water prices remain elevated, with temporary water prices in Northern Victoria and Murray Irrigation reaching their highest level in five years. Fertiliser costs have softened but remain above long-term averages.

Improved rainfall has supported pasture growth in Queensland, NSW and Tasmania, but dry conditions in Victoria, South Australia and WA have constrained milk flows.

Despite production challenges, retail demand is strong. Milk sales rose 1.1%, cheese 3.8%, and yogurt 8.4% (with Greek yogurt up 15%). Consumers are increasingly shifting to private label products as cost-of-living pressures persist, helping sustain domestic value growth