Overview of Australia's Dairy Industry

Australia contributes significantly to the global dairy industry, with an annual production of approximately 8.8 billion liters of milk. The country's dairy cattle herd numbers around 1.43 million, highlighting its vital role in the global supply chain.

Milk Processing and Cheese Production

The dairy processing infrastructure in Australia has the capacity to handle about 9.1 billion liters of milk per year. Cheese production is a key segment, with an annual output of 365,000 tons, projected to reach 435,000 tons by 2024. Additionally, Australia produces 300,000 tons of milk powder and whey each year, serving markets in the U.S., EU, China, and Southeast Asia.

Key Market Players and Export Activities

Major companies such as Saputo Inc., Coles Group Limited, Beston Global Food Co., and Yili dominate the Australian dairy landscape. The industry primarily exports milk powder, cheese, and whey, while butter is imported to satisfy domestic demand.

Recent Industry Events

Recent developments include Saputo Inc.'s sale of two processing plants to Coles Group Limited and Beston's exploration of divestments. Coles has strategically reduced cheese prices to enhance consumer access. Operational changes at King Island Dairy and Beston's entry into administration have impacted employees and farmers.

Current Market Trends and Challenges

Despite a projected 5% decrease in cheese production for 2023/2024, there is rising demand for premium dairy products. Skim milk powder and butter production are increasing, although labor challenges persist, particularly at Saputo's Burnie plant. International relations and legal disputes, such as Fonterra's case against Bega, add complexity to the industry.

Regional Focus: Victoria

Victoria accounts for 63% of Australia's milk supply but faces a severe housing crisis affecting workforce attraction. Climate change is prompting genetic advancements for heat-tolerant cattle and progress toward legalizing virtual fencing for cattle.

Weather and Other Challenges

Natural disasters have impacted over 80% of Australia's milk producers. Despite these challenges, the sector is recovering, with increases in both volume and value of dairy consumption. However, the 2025-26 dairy season began with opening milk prices below production costs, raising concerns among suppliers.

Consumer Trends and Sustainability

Companies like Bega Group are expanding protein-rich product offerings in response to growing consumer demand. The industry is advancing toward carbon neutrality through the implementation of emission-reducing practices across milk production.

Community Engagement and Corporate Strategies

Saputo Dairy Australia has been actively contributing to community development, including a \$100,000 donation for a new playground in Tatura. Meanwhile, Bega is seeking regulatory clearance from the ACCC for a joint bid to acquire Fonterra's Oceania business.

Innovations and Legal Developments

Bubs Australia Limited is focusing on growth in the infant nutrition market both domestically and internationally. ACM has filed a lawsuit against Fonterra, highlighting competition within the sector. A mechanical breakdown at a Bega processing plant in Tasmania has halted production, potentially causing a milk shortage. Australia's competition watchdog is reviewing Bega Cheese's acquisition proposal, focusing on competition issues within the dairy industry.

Moreover, a dairy farmer in Leongatha successfully integrated robotic milking systems, enhancing farm efficiency. Benjamin Vagg, a dairy farmer from Gippsland, transitioned his 560-cow operation to an eight-stand robotic milking system, focusing on strategic farm management.

Conclusion

Despite facing numerous challenges such as climate change, labor shortages, and market concentration concerns, Australia's dairy industry remains a pivotal component of the global dairy market, driven by innovation and strategic growth initiatives. The Australian dairy sector is a key focus in the M&A activities. Bega Group is intensifying the battle for market share in the Australian dairy sector by submitting a bid for Fonterra's assets, which include Australian businesses.

Innovative Collaboration

Tasmania's Van Diemens Land Creamery is involved in an innovative collaboration aiming to tackle malnutrition among palliative care patients with a unique high-protein ice cream. The Australian dairy industry is urging supermarkets to transmit a milk price increase to farmers. In a significant move for Australian agribusiness, the leading body representing dairy farmers has made a strong appeal to supermarkets to pass along a recent 10-cent per liter increase in milk prices to farmers. The issue highlights the complex dynamics of dairy economics within Australia, a market dominated by a few large retailers.

Facing its own unique challenges in the milk sector, southern regions in Australia are dealing with ongoing feed shortages, pushing hay prices to nearly double since May and leading to high culling activity.

Australia's milk production growth is projected to be less than half a percentage point. South-west Victorian farmers are urgently seeking long-term water security solutions amid recurrent droughts. South-west Victorian farmers are grappling with the challenges of securing a reliable water supply following a series of droughts that have forced them to purchase water for livestock.

Australian dairy-free brand Cocobella recalls coconut yoghurt pouches due to milk contamination risk. Cocobella, an Australian dairy-free brand, is recalling multiple variations of its Coconut Yoghurt pouches from major supermarkets and independent grocers after detecting an undeclared milk allergen.

Potential additional value linked to the Bega licences currently held by Fonterra's Australian business. The transaction includes an additional potential value of \$375 million linked to the Bega licences, which are part of Fonterra's operations in Australia.

Fonterra’s Australian operations are attracting interest from major dairy companies. Bega Cheese and Lactalis are seeking regulatory clearance to bid for Fonterra's Australian dairy assets. The Australian Competition and Consumer Commission (ACCC) is assessing the impact on competition in the dairy market.

The Australian Competition and Consumer Commission is reviewing Bega Cheese's bid to acquire Fonterra's consumer operations. The Australian competition regulator, the Australian Competition and Consumer Commission (ACCC), has initiated an informal review process to evaluate Bega Cheese's potential acquisition of Fonterra Co-operative Group’s consumer operation.

Modified: 2025/08/25