Report: Australia's dairy sector heads into a leaner year

South west Victoria is preparing for a pullback as milk production tipped to fall in 2026-27.

Author

Zara Cuthbertson
March 18, 2026

Australia’s dairy sector is coming off a high, but new forecasts suggest a softer year ahead for farmers, including those in south west Victoria.

What happened: The latest Bureau of Agricultural and Resource Economics agricultural outlook shows the gross value of milk production is expected to fall four percent from $6 billion to $5.7 billion in the 2026-27 financial year.

  • Milk production is projected to decline as national cow numbers fall.

  • The average farmgate milk price is tipped to sit around 71 cents per litre, down from 73 cents in 2025-26. 

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West Vic impact: The outlook carries weight locally, with south west Victoria producing almost a quarter of Australia’s milk.

The report also forecasts below average rainfall through autumn across southern Australia, with concerns lower pasture growth could see further downward pressure on milk production in south west Victoria.