SYDNEY, May 8 (Xinhua) -- Australia's dairy producers face "limited margin for error" in the 2026/27 season as rising input costs squeeze profitability, an industry report said on Friday.
Higher fuel, fertilizer, water, labor and interest rates remain the dominant pressure for dairy producers, eroding confidence and pushing production costs close to "break-even" milk prices, according to the newly-released annual Australian Dairy Outlook.
"Prices for fuel and fertilizer -- particularly urea, the most heavily applied nutrient in dairy systems -- have risen sharply. In addition, fuel surcharges are indirectly increasing the cost of a wide range of farm inputs and service provisions," said report author Michael Harvey, senior dairy analyst at Rabobank, an agribusiness banking group.
"Pressure is building across the broader value chain," with processors facing higher energy, packaging and freight expenses, increasing the likelihood of further price rises for consumers, he said, citing the impacts of the ongoing Middle East conflict.
Retail milk prices have already increased, with shoppers shifting toward lower-cost private-label products, Harvey said.
The report forecasts national milk production to decline by 1.2 percent in 2026/27, marking a third consecutive annual decline, as farmers limit expansion amid high costs and uncertain weather conditions. ■
