Record export values mask farmgate price stagnation as processors prioritize risk management over producer returns.
Australian dairy exports have shattered records, reaching an unprecedented $3.44 billion in the 2024-25 financial year according to Bendigo Bank’s Australian Agricultural Exports Report, representing a remarkable 10% year-on-year increase and 18.8% surge above the five-year average. Victoria led the charge as Australia’s largest exporting state, achieving a record $21.1 billion in agricultural exports with dairy contributing an additional $242 million alongside substantial gains in beef cattle and horticulture that more than offset declining crop export values across the sector.
The export boom has been driven primarily by elevated global pricing rather than volume increases, with record or near-record average export prices propelling total value gains across most dairy product categories. However, this international success story has failed to translate into corresponding farmgate price improvements, creating a troubling disconnect between Australia’s export performance and producer profitability that threatens the sustainability of the nation’s dairy farming operations amid challenging production conditions.
Processor risk management strategies have emerged as the primary factor preventing springtime price increases, with most southeastern Australian processors opening between $8.80-$9.30 per kilogram of milk solids in June and implementing only incremental adjustments ahead of the July 1 season start. Bendigo Bank Agribusiness senior analyst John Droppert highlighted the challenge of setting prices 12-13 months ahead while managing volatility, noting that while global prices have improved, they remain relatively range-bound, forcing processors to balance farmer cash flow needs against second-half financial year risk exposure.
Regional disparities in farmgate pricing have intensified concerns among producer organizations, with NSW Farmers dairy committee chairman Malcolm Holm identifying significant price variations between northern and southern NSW regions that have left some areas with returns below expectations. The combination of drought conditions, flood impacts, and stagnant pricing has created urgent need for springtime step-ups to restore farmer financial confidence, particularly for operations that have implemented costly survival strategies during extended dry periods across southeastern Australia.
Despite current record export performance, industry analysts project dairy export values will moderate to approximately $3 billion by the end of the 2025-26 financial year, though this forecast remains above the five-year average of $2.9 billion. RaboResearch senior dairy analyst Michael Harvey’s projection of an 8.05 billion liter national milk pool reflects ongoing drought impacts across key production regions, while continued challenging conditions suggest the disconnect between export success and farmgate returns may persist as processors maintain conservative pricing approaches to manage market volatility risks.
Source: Weekly Times Now – Australian dairy’s record-breaking year masks looming industry threat
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