Australian dairy farmers are warning that milk prices may need to rise as escalating fuel and fertiliser costs place severe strain on production. Industry leaders say without price adjustments, farmers may be forced to cut output, potentially tightening supply across the country.
Rising Input Costs Threaten Dairy Production
Australia’s dairy sector is grappling with a sharp increase in operating expenses, particularly for fuel and fertiliser—both essential to maintaining farm productivity.
Industry body eastAUSmilk, representing farmers in Queensland and New South Wales, says the cost surge is already influencing on-farm decisions. While supply of inputs remains steady, prices in some cases have more than doubled, eroding profit margins.
EastAUSmilk president Tim Bale said many farmers are reducing fertiliser use, particularly urea, to manage costs. However, this has a direct impact on pasture growth, herd size, and ultimately milk output.
“A cutback in fertiliser affects how much feed you can grow, how many cows you can milk, and the volume of milk produced,” Mr Bale said.
Some producers are already scaling back operations, including selling cattle or reducing staff. These decisions, he warned, could lead to a decline in milk supply, particularly in eastern states.
Calls for Higher Retail Milk Prices
The dairy industry is advocating for an increase of around 30 cents per litre at the supermarket level to help offset rising costs linked to global instability, including conflict in the Middle East.
Unlike many industries, farmgate milk prices are typically set annually, limiting farmers’ ability to respond quickly to cost spikes throughout the year.
Mr Bale believes consumers would accept higher prices if they were confident the additional revenue reached farmers.
“Most feedback suggests shoppers are willing to pay more if it supports farmers directly,” he said. “We’re simply asking for a fair return.”
Production Decline Raises Supply Concerns
While industry leaders stop short of predicting widespread shortages, there are growing concerns about reduced output.
South Australian Dairyfarmers’ Association president Rob Brokenshire noted that production in South Australia has already fallen by about six per cent over the past year, largely due to drought conditions.
“With strong demand for milk, maintaining supply will require significantly higher input costs,” he said.
Mr Brokenshire supports price increases, provided the additional revenue flows through the supply chain to both farmers and processors.
Long-Term Decline in Australian Milk Output
Australia’s milk production has been on a downward trend for decades, currently sitting at around 8 billion litres annually—well below New Zealand’s output of approximately 21 billion litres.
The Australian Dairy Products Federation (ADPF) says maintaining domestic supply is increasingly critical, particularly as global disruptions continue to affect agricultural markets.
Executive director Janine Waller said collaboration between government, retailers and producers would be key to stabilising the sector.
“Every drop of milk matters,” she said. “We need coordinated support to secure future supply.”
Ms Waller also urged consumers to prioritise locally produced dairy, highlighting the cumulative impact of recent challenges including droughts, floods and bushfires.
Farmers Facing Mounting Pressure
For many producers, the current situation is the latest in a series of compounding pressures.
South East South Australia farmer and DairySA chair Andrew Cavill said the industry has endured continuous disruption since the COVID-19 pandemic, with the current cost crisis among the most severe in decades.
“Everything—from fuel and fertiliser to animal health products and seeds—has become more expensive and harder to source,” he said.
Mr Cavill warned that prolonged cost pressures could affect not only dairy but broader agricultural output, raising concerns about national food security.
Daily Operations Becoming More Expensive
On the ground, farmers are feeling the immediate impact. South Australian dairy farmer Mandy Pacitti said fuel costs alone are a major burden, with several hours each day spent operating diesel-powered machinery to prepare feed.
“It’s not just fuel and fertiliser—every input is going up,” she said. “We’re at the bottom of the chain and can’t pass those costs on.”
Retailers Balancing Costs and Consumers
Major supermarkets say they are working to balance rising supply chain costs with affordability for consumers.
A Woolworths spokesperson said the retailer aims to support suppliers while minimising price impacts at the checkout.
Similarly, ALDI said it continues to monitor the situation closely and maintain fair relationships with suppliers while keeping prices as low as possible.
Outlook for the Dairy Sector
The Australian dairy industry faces a delicate balancing act: maintaining viable farm operations while ensuring milk remains affordable for households.
Without intervention—whether through higher retail prices, government support, or supply chain adjustments—farmers warn production cuts may become more widespread.
In the months ahead, the sector’s ability to adapt to ongoing global and domestic pressures will be critical to ensuring a stable and sustainable milk supply for Australian consumers.
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