Milk production expected to plateau at eight billion litres as national dairy herd shrinks five per cent

Australia’s dairy production has continued to contract, with national milk production levels continuing their trend of being down each month on the previous year.

According to ANZ’s latest Agri Commodity Report, while production figures for some commodities — including grain — have fluctuated based on factors including varying weather patterns, the outlook for the dairy sector appears far more structural, with the national dairy herd continuing to shrink.

ANZ head of agribusiness insights Michael Whitehead said one positive was that yields per cow continued to climb, a trend which had resulted in national milk production levels declining at a slower rate than the level of the national milking herd.

“Looking to the medium and longer term, the trend shows little sign of changing, with the latest forecasts predicting that the national milking herd will continue to decline until at least 2027-2028, falling around five percent from current levels,” Mr Whitehead said.

“While a fall of around five percent from the current herd size does not sound major, it is still almost 50 percent below the size of the herd 20 years ago, before it began its decline.

“That said, given the forecast for ongoing yield rises, and the herd decline slowing the national milk production level is forecast to plateau at around eight billion litres.”

Mr Whitehead said the ongoing contraction of the Australian dairy herd continued to create discussion around the causes, as well as what this may mean going forward for dairy producers, as well as the whole supply chain.

“In looking at factors which may see the decline stop, it may be worth comparing dairy to the sheep industry, where a long period of decline in the nation flock appears to have plateaued over the past decade, as those who are passionate about the industry choose not only to remain in it, but to pursue it innovatively,” he said.

“Looking ahead, if the decline in the milking herd continues, and if the growth in cow milking yields slows or plateaus, then total milk production may decline to a point which increasingly impacts the landscape of the current milk processing operations in Australia.”

While domestically milk consumption remains strong, it is yet to be seen just how much cost of living pressures may impact consumption of dairy products, especially discretionary products, as well as more expensive milks, finer cheeses, and expensive yoghurts.