Many factors influence Australian milk prices - including market forces both here in Australia and globally. Suppressed retail prices and a shrinking Australian milk supply have also influenced the increase we've seen of late. Dairy Australia's Situation and Outlook quarterly reports are a great source of up-to-date information regarding the Australian dairy market.

Milk prices in Australia are shaped by many factors, both at home and internationally. Recently, costs across the supply chain—such as production, transportation, processing, and packaging—have risen sharply. These increases are partly driven by global events, including the COVID-19 pandemic and the Russian invasion of Ukraine, which have impacted markets worldwide. Dairy is no exception, with rising costs being reflected in higher milk prices.

Another factor is the long history of low retail milk prices in Australia, particularly $1 per litre private label milk. These prices have only recently started increasing, meaning the starting point was much lower than global standards.

At the same time, Australia’s milk production has been declining, creating fierce competition among processors to secure enough milk from farmers. This has pushed farmgate prices higher, which in turn affects retail prices. General inflation has also contributed to the increases.

If retail milk prices remained suppressed, more milk would likely be diverted to higher-paying markets, such as food service or export, further impacting availability on supermarket shelves.

In short, Australian milk prices have risen due to increasing costs, limited supply, and inflationary pressures.

For more detailed insights, Dairy Australia regularly produces market commentary as part of its Situation and Outlook reports and are updated quarterly. Learn more at dairyaustralia.com.au.