Milk prices have risen at the fastest rate since records began during the 2021/2022 season, a new report by agribusiness banking specialist Rabobank has found.

Although rising milk prices are yet another hit to the wallets of Australians battling their budgets during the cost of living disaster, it has had a positive impact on the struggling dairy industry.

The higher price of milk has offset the growing costs of fertiliser, fuel and feed that are necessary for farmers to produce the product.

“For Australia’s dairy producers, farmgate margins remain positive and are supported by the record milk prices,” co-author of the report Michael Harvey said.

“Average farmgate milk prices across Australia’s Southern Export regions range between AUD 9.50-10.00/kgMS.”

But the key struggle facing many industries is labour shortages and the dairy sector is no exception, despite the offset by high retail prices.

Harvey said milk prices should remain the same for the remainder of the year.

Currently, a litre of full cream milk costs $1.60 at Coles and Woolworths in Australia.

What about this season into next year?

Despite inflation pegged to continue rising, milk production is forecast to trend downwards during December this year and into January next year.

Rabobank claims this is due to the impact of flooding and continued heavy rainfall during 2022.

October and November are the peak production months for dairy farmers but due to the record-breaking floods during those months, total production is down 6.6 per cent nationally.

More rain is forecast throughout summer as La Nina conditions continue.

“Many dairy production regions on Australia’s east coast have been dealing with excessive rainfall and flooding,” Harvey said.

“There has been significant feed and fodder losses as a result of the rain and flooding – it is one of the key challenges faced by impacted farms.”

“Some supply chain/logistics issues have been reported as a result of the wet weather – including some dumping of milk – but not to the point of having a material impact on milk processing.”

But the good news is, the dairy industry will see more feed in the months ahead as the saturated ground dries out and production ramps up again.

Exports are continuing to grow despite flooding impacting the availability of milk supplies.

It comes after export slowed during the COVID-19 pandemic and reveals the beginning of a return to normal.

“Australia’s total dairy export volumes (tonnage) were four per cent higher in the first two months of 2022/23 season,” Harvey said.

“However, it was a mixed bag – liquid milk exports are running strong, but it has been a slow start for cheese and whey.”

Australian milk exports are predicted to grow 1 per cent year on year.

How do we compare to overseas?

Australia appears to have performed better than other countries in terms of milk supply and export in the past year.

Rabobank said there has been a global milk supply “recession” over the past five quarters as production slowed, and imports lessened.

China particularly felt the pinch as the country tightened its purse strings in terms of importing milk.

In the US, buyers have begun to submerge the market again as the country recovers from the impact of COVID-19.

“Dairy demand in the US has remained defiant in the face of cost-of-living challenges, while European consumers are now feeling the pinch at the retail level,” the report said.

Some resilience in Southeast Asia is evident, but smaller sales volumes and downstream margin pressure illustrate the headwinds.”