In its latest semi-annual dairy and products report, USDA’s Foreign Agricultural Service estimates Australian 2026 milk production to lift 1.4% year-over-year. This reflects a stronger‑than‑expected recovery from drought in Southwest Victoria and South Australia, plus firm opening milk prices for 2026–27.

Lower feed grain costs in early 2026 are helping offset still‑elevated fuel and fertiliser prices linked to Middle East disruptions, supporting modest production growth. National milk output rose 1.6% YOY in the first quarter. However, the outlook remains cautious as the Bureau of Meteorology and global agencies warn of a high likelihood of an El Niño developing later in 2026, elevating risks of below average rainfall and drought across Eastern Australia.