“A really difficult situation”: Drought-hit farmers face disappointing opening milk prices

Despite a modest rise in opening milk prices for the 2025/26 season, a West Vic dairy farmer says the increase falls short of what’s needed to stay afloat — particularly as farmers grapple with a second consecutive year of drought and increased costs.

Milk processing companies announced their opening farmgate milk prices earlier this week, with the average minimum price sitting at about $8.50.

Dairy Farmers Victoria president Mark Billing, who farms at Larpent, told The Brolga the announced figures have landed at the lower end of expectations.

“Dairy farmers in Victoria were very keen to see a milk price around $9.20 at opening as a weighted average,” Billing said. “I think anything under $9 is going to create a really difficult situation for a lot of farmers across Victoria.”

Milk processors are required under the mandatory Dairy Code of Conduct to release their opening prices a month before the new financial year begins. Farmers are paid based on the level of fat and protein in their milk, referred to as milk solids, or MS.

Milk prices for the 25/26 financial year:

• Milk processor Bulla Dairy Foods has set an opening range between $8.40 and $9.20/kg MS — up from $8.05–$8.85/kg MS last season. 

• Saputo Dairy Australia has offered a weighted average of $8.80–$8.95/kg MS, while Burra Foods is sitting between $8.60 and $9.10/kg MS. 

• Fonterra has announced an average farmgate milk price of $10.00/kg MS, but with a wide forecast range of $8.00–$11.00. 

• Australian Consolidated Milk revised its opening price upwards to $9 just days after its initial announcement, up from their range of $7.80 to $8.20 for 2024/25. 

“We're coming off a milk price drop last season,” said Billing. “The prices being announced now for the current season are nowhere near as much as what farmers are going to need to be sustainable.”

Billing said many farmers are already making “really difficult decisions” as drought conditions intensify across the region.

“Selling cows, where the next load of food is coming from, all of those big critical decisions are being made every day across the state at the moment,” he said.

“A lot of the reserves that farms have built up over a number of years all went last year. Quite a few southwest dairy farmers have gone into a season with another failed autumn.

“A lot of farmers have re-sewn pastures only to see them strike and then die because of the lack of rainfall.”

“A margin is a very rare thing in the farming sector”

Part of the issue of disappointing numbers lies in the pricing strategy of processors. While they factor in a margin to protect their business, Billing said farmers are rarely afforded the same buffer.

“They’re probably looking at pricing in a margin for themselves. What we're saying is that farmers haven't had that opportunity,” Billing said. “A margin is a very rare thing in the farming sector at the moment.”

It’s hard to know what the markups on dairy products look like for milk processors once they hit supermarket shelves, as most are not publicly listed and, as a result, do not release profit and loss statements.

“What I would say is that domestic pricing has stabilised. The domestic market is reasonably strong at the moment, as is the global market,” Billing said.

“So we would assume as farmers that there is more margin in the system, and we just want to see some of that margin flow through to us.”

Billing said the support of milk processors is needed now more than ever to ensure a sufficient milk pool from local suppliers is available to them in the long run. 

“We just want the processors to stand beside us and get us through this period,” he said. “If they do that, they'll have a milk pool that they'll be able to draw from into the future.”

“I think if there’s less milk, we'll see processors leave the Australian market. In the longer term, if there's no milk to fill their plants, then that's got long-term ramifications.”

Australia’s dairy future under threat?

Australia is currently self-sufficient in dairy, but Billing cautioned that shrinking milk volumes could open the door to greater reliance on overseas products.

“Some of the supermarkets are already doing that on the back of price rather than quality, and provenance of grown products,” he said.

But the loss of dairy farmers in local West Vic communities doesn’t just affect supply chains.

“Shrinking of the milk pool takes those farmers out of the system and out of the community,” Billing said. 

“A lot of rural communities in Victoria rely on dairy farmers to keep their communities alive — particularly the likes of Cobden over this way, and other areas around the state.”

With the dairy industry now in its “trading period”, where processors can revise prices and farmers assess contract offers ahead of the new season, Billing said movement has already begun.

Australian Consolidated Milk is one of the first processors to revise their opening price to $9/kg MS.

“We would expect that there’ll be some companies that'll start to look at their pricing and see whether that’s going to retain dairy farmers as their suppliers,” he said.

Billing encouraged farmers to explore their options.

“I think it's important that farmers shop around and get the best price for their business. A few cents a kilogram of milk solids is going to make a big difference for farmers that are really cash-strapped.”

As the second drought year tightens its stranglehold on the region, Billing said most farmers were looking for a “hand up, not a handout”. 

“Whether it's rate relief or the opportunity to get grants to buy fodder, I think the government needs to definitely be looking at all options,” he said. 

“Agriculture is central to a lot of communities within southwest Victoria,” Billing said. “We need to keep the rural areas vibrant, and milk processors and both governments need to play a part in that.”

Drought relief an ongoing conversation in West Vic

In May, multiple West Vic mayors criticised the state government for its “inadequate” current drought relief packages.

Southern Grampians Shire’s Mayor, Dennis Heslin, said the package “fails to adequately address” the mounting financial pressure on farmers in Western Victoria.

A drought support package of $15.9 million, announced this month by Agriculture Minister Ros Spence, would “help more farmers and communities over winter”.

The package will continue for the existing 11 Local Government Areas across southwest Victoria, including the Corangamite and Southern Grampians shires, and be expanded to another 13.

A report by Environment Victoria notes that Victoria’s cool season rainfall has already decreased by about 13 percent, which is part of a broader pattern of decreasing rainfall in southern Australia. These systems push rain-bearing cold fronts further south, away from Victoria, resulting in fewer rain events during the cool season.

The report explains that the increase of persistent high-pressure systems over southern Australia is one of the “primary reasons” for reduced rainfall since February last year, caused in part as a consequence of mining and burning coal, oil and gas.