Australian milk prices shooting up, Rabobank’s latest research reveals

Michael Harvey, Senior Analyst for Dairy and Consumer Foods at Rabobank

Aussie consumers are seeing significant price increases across dairy products – based on the national Consumer Price Index (CPI) data – with milk prices having risen at the fastest rate since records began, according to a new report by agribusiness banking specialist Rabobank.

What were Rabobank’s thoughts on the findings?

“Households are trading down to private label offerings, with volume declines in grocery and foodservice channels being more evident – it looks set to be a tough year,” said report co-author Michael Harvey, Senior Analyst for Dairy and Consumer Foods at Rabobank.

“For Australia’s dairy producers, farmgate margins remain positive and are supported by the record milk prices. Average farmgate milk prices across Australia’s Southern Export regions range between AUD 9.50-10.00/kgMS. The high milk prices have offset cost headwinds for farmers. While labour availability remains a challenge for dairy farming businesses.” Harvey said Rabobank is not expecting more major lifts in prices as the season draws to a close.

“A wet summer is in play across eastern Australia– driven by the La Nina in the tropical Pacific Ocean and a negative Indian Ocean Dipole (IOD). And 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,” Harvey further commented.

What were the findings of Rabobank’s survey?

In its Dairy Quarterly Q4 2022 – Walking the Tightrope into 2023, Rabobank says while the Aussie consumer has shown resilience in the face of cost-of-living pressures, signs of dairy demand weakness are emerging as a willingness to spend on discretionary items softens.


Rabobank is revising its milk production forecast downward for 2022/23, with the impact of production constraints, the result of flooding and excessive rainfall, becoming visible in the peak production months – October and November. The report said as of October, Aussie milk production is down 6.6% for the season, with widespread decreases across all states.

Dairy farmers can look forward to access to plenty of supplementary feed in the months ahead. Rabobank is expecting a large winter wheat crop, with harvest now underway.


Australia’s dairy exports continue to grow despite falling milk supply. Mr Harvey said this is supported by improvements in global freight markets and normalising consumer behaviour – post COVID – across export markets in Asia. “Australia’s total dairy export volumes were 4% higher in the first two months of 2022/23 season. However, it was a mixed bag – liquid milk exports are running strong, but it has been a slow start for cheese and whey,” Harvey said.

Global outlook

Weaker global dairy markets remain a key theme as 2022 comes to a close, the report says. But there is clear divergence between regions and dairy products. The Rabobank report says cheese and butter prices in the United States and EU have performed the best, while Oceania Global Dairy Trade (GDT) powder and butter prices have been on the decline.

Oceania skim milk powder (SMP) prices led the way, dropping 14% from Q3 2022 end prices and plummeting 34% since the peak in early Q2 2022. The second half of 2022 has tested dairy’s affordability for importing countries. “China remains quiet on the buying front compared to last year as it digests local inventories and imported stock,” the report said.

“The US dollar lifted by six per cent on a broad dollar index basis at its peak during Q3, before eroding much of the gains by mid-November. Yet, weaker US dollar-priced dairy commodities have incentivised tier two and tier three buyers to return to the market, taking the opportunity to refill inventory pipelines as tourism returns and hospitality recovers,” it said.

Rabobank expect the global milk supply ‘recession’ experienced for the past five consecutive quarters to end, with production having progressively declined over that period. “Q4 2022 brought another period of weather-disrupted production to Oceania. But traces of life from the global export engines are sprouting, driven by Europe and the US. Rabobank expects milk supply will gain modest momentum in 2023 from most regions apart from Australia” it said.

Milk production from the big seven dairy exporting regions – New Zealand, Brazil, Argentina, Uruguay, EU, US and Australia – is anticipated to grow by 1% year-on-year, enough to offset the 0.8% decrease in 2022 and remain on par with 2021’s production, the report said.

Meanwhile, consumption growth in some export regions is becoming more challenging as consumers juggle significant price increases in the dairy cabinet. “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. Some resilience in Southeast Asia is evident, but smaller sales volumes and downstream margin pressure illustrate the headwinds,” the report said.

Rabobank analysts say all eyes remain fixed on China, “Buying patterns will remain subdued across 1H 2023 if rolling lockdowns remain a feature, milk production continues to be set on growth mode, and consumption wavers as challenging economic conditions take hold. China is likely to re-enter markets in Q2 with a bigger presence from Q3 2023 onward,” it said.