Oceania dairy set for peak volume in October

With milk production gaining momentum as spring arrives, Rabobank predicts global markets will remain well-supplied during this period.

RaboResearch analyst Michael Harvey reported that dairy commodity prices mostly drifted lower in August, according to USDA price data. Global fundamentals, however, were well balanced through this period, and current spot prices remain well above five-year averages for butter (+29%) and whole milk powder (+11%), and more aligned to the medium-term average for skim milk powder (-1%) and cheese (+1%).

Taking a look at Australia’s performance over the past financial year, 2024–25 milk production reached 8.315 billion litres — representing a marginal fall of 61 million litres of milk (-0.7% YOY). Drought conditions and feed shortages hampered production during this time — particularly across the south-east corner including in the western districts. This region saw a drop of more than 5% in the season. Unfavourable conditions also dragged production lower in eastern Victoria and Tasmania. July milk production was down 4% to start the new season.

However, across most of the key dairy export regions, the velocity in milk supply growth has outperformed RaboResearch’s previous expectations. For example, July milk production in the US posted its strongest growth rate (+3.4% YOY) since 2021, and New Zealand has experienced a record start to its new season (albeit in the low part of the season).

Rabobank predicts that milk supply growth will maintain momentum into 2026, but at a moderating pace. In the second half of 2025, milk supply growth in the Big 7 dairy exporting regions is expected to increase by 1.8% YOY before slowing to 1.1% YOY in 2026.

With the Oceania ‘spring flush’ approaching, October will be the peak volume month for both Australia and New Zealand. While Australia is facing a weaker spring peak due to feed shortages and a smaller herd, New Zealand is anticipating a very good peak. The forecast payout is currently set at a record high, with seasonal conditions broadly ideal in many regions in Oceania.

Looking forward, the global dairy market looks set to be adequately supplied. Rising milk supply and sluggish domestic demand in key channels (namely foodservice) present a higher probability for a larger exportable surplus across most export regions, presenting downward price pressure on the dairy commodity market in the near term.

Image credit: iStock.com/Rusell Hendry