Rabobank senior dairy analyst Michael Harvey said recent severe flooding in northern NSW is expected to negatively impact milk production with milk production expected to return to growth in 2022/23.

The latest Rabobank Global Dairy Quarterly Outlook notes stronger export returns are flowing through to the farmgate with a potential for further increases in the current season and next season as exporters reap the benefits of higher commodity prices. Harvey said dairy farmers continue to enjoy good profitability but warned a margin squeeze was looming with the cost of key inputs elevated for the next production season, eroding some benefits of higher milk prices. The outlook for feed remains favourable with plentiful supplies available but with elevated risk of higher prices. Water availability is also healthy for dairy farmers  reliant on irrigation, with allocations at record levels in some systems in the southern Murray-Darling Basin.