While strong farmgate milk prices for local dairyfarmers has been good, it is adding pressure to the competitiveness of Australian dairy products.
That was according to Dairy Australia industry analyst Eliza Redfern, who delivered a market update and results from DA's March Situation & Outlook report at the recent DairySA Central Conference in Hahndorf.
"And I'm not just talking on the global stage. I'm also talking domestically within Australia too," she said.
"We're competing against the likes of the United States, who have a significant amount of cheese sitting at a very cheap price at a time when importers are focused on saving costs because inflation has been widespread.
"Quality has a part to play, but it is very much skewed towards that cheap mindset."
Ms Redfern said locally, especially within the food service and ingredients space, cheaper products are also being sought.
"For quite some time it was cheaper for Australian buyers to ship in products from the likes of New Zealand or even from the northern hemisphere," she said
"It led to us importing the most overseas dairy in a single season last season.
"Australia continues to import large volumes of overseas dairy; over 2023, Australia shipped in more than 332,000 tonnes of dairy - 5pc more than the previous year."
When it came to local milk production, Ms Redfern said figures were "favourable" due to "better-than-unexpected weather conditions in a lot of key producing areas".
"We had a very tough season from a milk production perspective last year, with repeat flood events in many different regions," she said.
"So while milk production has been growing, it is still only comparable to those lower volumes that were produced last season."
But Ms Redfern said most regions were up on a year-to-date basis, with SA up 3.1pc, and Dairy Australia has revised its production forecast for national milk production to grow slightly, ending the 2023-24 season close to 1pc above last season.
"That will take us to a national volume of 8.2 billion litres (8.1bL last season)," she said.
It was "quite different" globally however, she said.
"There has been growth, but everyone is also dealing with their own weather challenges," she said.
"Input costs are also still quite high and there is the added pressure for a lot of other key dairy producing and exporting regions of lower farmgate prices, which is not something we have been experiencing this season.
"As a result, farmers globally have had to make decisions, such as potentially culling. This has then had an impact on global milk production."
Looking ahead, Ms Redfern said global milk supply was likely to remain tight, providing some level of support for export prices, especially for Australia.
"But global demand may also remain quiet," she said.
"We know that inflation is still high in a lot of different places. The Chinese economy is still very weak.
"If China is barely importing anything, that has a huge impact.
"Interest rates also remain very high in many different countries. All of that is impacting global demand. And we are starting to see prices again come down."
Ms Redfern expects there will be adjustments made to farmgate milk prices this season as "global dynamics force an equilibrium here in Australia".