F E A T U R E D

Extreme weather could send milk prices soaring, deepening challenges for the dairy industry

Australia’s dairy industry is in the middle of a crisis, fuelled by an almost perfect storm of challenges. Climate change and extreme weather have been battering farmlands and impacting animal productivity, creating mounting financial strains and mental health struggles for many farmers.

Meanwhile, beyond the farm gate, consumer tastes are shifting to a range of dairy substitutes. Interest and investment in alternative dairy proteins are accelerating.

Earlier this month, industry figures warned consumers to prepare for price rises amid expected shortages of milk, butter, and cheese. Already mired in uncertainty, the dairy industry is now being forced to confront some tough questions about its future head-on.

Dairy under pressure

Dairy is Australia’s third-largest rural industry. It produces more than A$6 billion worth of milk each year, and directly employs more than 30,000 people. But the sector has been under sustained pressure. This year alone, repeated extreme weather events have affected key dairy-producing regions in southern and eastern parts of Australia.

In New South Wales, dairy farmers face increased pressure from floods. In May, many regions had their monthly rainfall records broken – some by huge margins.

In Victoria, drought and water shortages are worsening. Tasmania, too, continues to endure some of the driest conditions in more than a century.

Conditions have prompted many farmers to sell down their cattle numbers to conserve feed and water. All of this heavily impacts farm productivity. Agriculture has long been predicated on our ability to predict climate conditions and grow food or rear animals according to the cycles of nature.

As climate change disrupts weather patterns, this makes both short and long-term planning for the sector a growing challenge.

High costs, low profits

Climate change isn’t the only test. The industry has also been grappling with productivity and profitability concerns. At the farm level, dairy farmers are feeling the impacts of high operating costs. Compared to other types of farming (such as sheep or beef), dairy farms require more plant, machinery, and equipment capital, mostly in the form of specialised milking machinery.

Many farmers are also concerned about the price of milk. The modest increase in farmgate milk prices – just announced by dairy companies for the start of the next financial year – left many farmers disappointed. Some say the increase isn’t enough to cover rising operating costs.

Zooming out, there are concerns about a lack of family succession planning for dairy farms. Many young people are wary of taking on such burdens, and the total number of Australian dairy farms has been in steady decline – from more than 6,000 in 2015 to just 4,163 in 2023.

What’s the solution?

Is there a way to make the dairy industry more productive, profitable, and sustainable? Australian Dairy Farmers is the national policy and advocacy group supporting the profitability and sustainability of the sector. In the lead up to this year’s federal election, the group called for $399 million in government investment to address what it said were key priorities. These included:

• Investment in on-farm technologies to improve efficiencies

• Funding for water security

• Upskilling programs for farmers

• Support for succession planning.

However, as the industry struggles to grapple with a changing climate, financial strain, and mental health pressures, there should also be pathways for incumbent farmers to transition, either to farming dairy differently (such as by reducing herd sizes) or exiting dairy farming and into something else.

Dairy without the cows

The push to make dairy production more sustainable and efficient faces its competition. Several techniques in development promise dairy products without the cows, through cellular agriculture – and more specifically, “precision fermentation”.

Australian company Eden Brew, in partnership with dairy giant Norco, has plans to produce and commercialise precision fermentation dairy proteins. And last year, Australian company All G secured approval to sell precision fermentation lactoferrin (a key dairy ingredient in baby formula) in China – another animal-free milk product.

It is important to note that cost and scalability for cellular agriculture remain a challenge. Nonetheless, Australia’s rapidly growing non-dairy milk market – soy, oat, and so on – is now worth over $600 million annually. This reflects the global shift towards plant-based options driven by health, environmental, and ethical concerns.

Is there a win-win outcome?

Is there a possible future where more funding is given to produce milk at scale through precision fermentation while we also look after incumbent dairy workers, farms, and the rural sector at large to diversify or leave the sector altogether?

Some believe this future is possible. This is what researchers call “protein pluralism” – a market where traditional and alternative proteins coexist. Long-term planning from both the dairy industry and the government would be needed.

Remember, while techniques like precision fermentation offer the promise of animal-free dairy products, their benefits are yet to materialise. How they will ultimately benefit the whole of society remains speculative.

What can we do now

For this reason, some scholars have argued we should prioritise actions that can be taken now. This includes support for practices such as agroecology, which seek to address injustice and inequity in food systems to help empower primary food producers. A recent study found Australian dairy farmers were interested in financial and technical advice to make decisions about where they take their business in future.

Despite growing recognition of the challenges facing the dairy sector, responses from the government and alternative dairy remain uneven. A more coordinated approach is needed for affected farmers, helping them adapt or diversify with guidance from government and industry experts.

As winter sets in across the nation, Australian farmers are once again reminded that no two seasons are ever the same. From lush green pastures in Gippsland to the dry, wind-swept plains of western New South Wales, the outlook for 2025 is mixed—but not without hope.

Agribusiness lenders are entering this season with a careful eye. Variable rainfall, patchy yield forecasts, and the creeping effects of climate risk are prompting financiers to take a more thoughtful approach to credit risk, cash flow modelling, and exposure management. For many farmers, it’s not just about gearing up for harvest, but about finding the right financial partner who understands the rhythm of the land.

Dairy continues to be the quiet achiever of Australian agriculture. With 2025/26 farmgate prices up 6% year-on-year, many producers are reporting resilient EBITDA margins and stronger debt servicing positions. It's a silver lining that’s providing welcome breathing room for businesses who’ve weathered both drought and disruption over the last decade.

Meanwhile, the Reserve Bank of Australia’s 0.25 percentage point rate cut in May—alongside projections of a 2.85% cash rate by early 2026—is giving borrowers new space to breathe. But it’s a cautious optimism: ongoing global trade tensions and commodity price swings still cast shadows over rural balance sheets.

Looking ahead, lenders are beginning to factor in sustainability metrics—particularly emissions from animal production—into the broader credit assessment conversation. That means green and transition finance could soon become more than buzzwords; they might shape the margins, terms, and access to capital in the years to come.

At Pay In Time Finance, we’ve spent years helping Australian farmers and agribusiness operators navigate the changing financial landscape. From drought relief support to new machinery finance, we’re proud to back the businesses that feed the nation—quietly, reliably, and with the kind of grit only found in the bush. We’re not just about funding—we’re about understanding where your operation’s going next.

For now, the season calls for both prudence and possibility. And as the frost settles on the paddocks and the long days shorten, one thing is clear: Australian farmers know how to adapt. And that resilience, paired with the right financial tools, can weather just about anything.

If you’re considering your next move before EOFY hits, now’s the time to act. Let us help you make the most of it. www.payintime.com.au

WEEKLY AUCTION DATES – 2025

1.) 20^th June 2025

Ag Machinery

A recent pulse survey conducted by market research company Kynetec has found an overwhelming sense of optimism among farmers when it comes to their economic outlook, pointing to a potential resurgence in machinery purchases in the not-too-distant future.

Following three years of booming sales, the agricultural machinery market has since softened significantly.

The survey, which polled 184 farmers across 536,498 hectares of farmland, provides key insights into farmers' purchasing intentions and economic outlook.

According to the survey, 61 per cent of farmers said they bought their last tractor new, with 13 per cent of these purchases occurring in the previous six months and 14 per cent in the past six to 12 months. A sizeable 30 per cent bought their last tractor more than five years ago.

Looking to the future, what are farmers’ buying intentions?

The survey results show that 11 per cent of farmers whose last tractor was new are planning to make their next purchase within the next 12 months, while an additional 18 per cent are looking to invest in new machinery in the next one to two years.

However, economic optimism among farmers is the key factor that is expected to contribute to an uptick in machinery purchases.

Nearly half (49 per cent) of respondents said their current economic situation is "good" to "very good," and 46 per cent believe their financial situation will improve over the next two to three years. This growing confidence in the future is expected to drive an increase in machinery purchases as farmers look to upgrade their equipment and boost productivity.

Already, dealers are reporting strong enquiries from the market; however, that has yet to translate into tangible sales, according to the Tractor and Machinery Association of Australia (TMA). It remains to be seen when and how the renewed confidence will translate into action.

Input Costs

In 2025–26. Some global energy prices – such as crude oil – are expected to ease over 2025–26

Reflecting rising global production and subdued global activity weighed on (see Economic outlook). Easing cost growth and increasing prices received by producers for agricultural commodities are expected to support a rise in farmers’ terms of trade in 2025–26, continuing to recover from lows experienced in 2023–24 (Figure 1.9).

Nonetheless, many input costs are forecast to remain elevated in real terms in 2025–26 – such as for fertiliser, chemicals, livestock purchases, services and labour (Figure 1.10). Natural gas prices are expected to remain relatively elevated, adding to fertiliser price pressures.

ABARES June 2025 Agricultural Commodities Report 10 Figure 1.9 Prices paid, prices received and farmers’ terms of trade, Australia Figure 1.10 Real average annual selected input prices, Australia.

Note: To the right of the dotted line represents estimates.
Note: 2024–25 Australian dollars. Index 2023–24 = 100. Data and forecasts. Index 2023–24 = 100.

To the right of the dotted line are estimates and forecasts.

In addition, the expected higher farm use of some inputs is contributing to slightly higher average broadacre farm costs (see Farm performance). For example, fertiliser and chemical use are expected to rise in some cropping regions compared to last year, given favourable conditions at the start of the winter season, while livestock purchase costs are expected to rise in line with higher saleyard prices.

Average broadacre farm business profit is expected to fall in 2025–26 to $141,000 but remain elevated, driven by expected lower broadacre cropping and livestock production, and as farm costs remain relatively high (see Farm performance).

Despite this, domestic demand for Australian agricultural products is expected to remain robust in 2025–26, driven by rising household consumption. Household consumption grew by 0.4% in the December quarter 2024 with broad-based increases across discretionary and essential spending categories, supporting rising GDP per capita for the first time in two years (see Economic outlook).

Household consumption is expected to continue rising in the near term, supported by rising real household incomes and expected easing in monetary policy.

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Supporting Small Producers Starts with Knowing the Basics

What is NLIS – and Does It Apply to You?

Whether you're managing a small herd of cattle, a few sheep on a lifestyle block, or considering livestock for private consumption, understanding the National Livestock Identification System (NLIS) is one of the first and most important steps you’ll take.

The NLIS is Australia's system for identifying and tracking livestock to enhance food safety, biosecurity, and market access. It’s not just for large commercial producers—it applies to everyone who owns cattle, sheep, or goats, regardless of the size of your operation or your reason for keeping livestock.

You can read more about the basics of NLIS, including when and how it applies to you, here:
🔗 What is NLIS & Does It Apply to Me?

This Week at JAB Agri Solutions

This week, we’re busy putting the final touches on our national report for Meat & Livestock Australia (MLA) and Integrity Systems Company (ISC). This project has involved hundreds of small-scale and hobby producers from every corner of the country, and the response has been phenomenal.

One message stood out clearly:
👉 You want support.
👉 You want one place to go.

As part of our final report, we’re now strategically planning how we can deliver that—a national approach that simplifies compliance, supports your operation, and connects you with the tools, training, and resources you need in one hub.

This is about making it easier to do the right thing, stay compliant, and grow with confidence, no matter your scale or experience.

We’re Listening—and We’re Acting

Thank you to everyone who contributed to the survey and workshops. Your voice is shaping the future of small producer education in Australia. If you have questions about NLIS, LPA, biosecurity, or simply need help getting started, we’re here.

📧 Reach out via our website www.jabagrisolutions.com.au
📍 Or keep following along for more updates on the National Education Hub and Compliance Toolkit.

Let’s make this space better—together.

Kind Regards,
Amanda Burchmann
Livestock Production & Industry Development Specialist
Founder | Advocate | Producer
📞 0408 847 536
📧 [email protected]

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