Mr Matthews said the prolonged dry conditions in a number of areas of South Australia and western Victoria have led to significant water shortages, high feed costs and reduced pasture growth.
“Dairy farmers have managed their way through many droughts before, but this drought certainly rates among the most challenging seen in a number of regions in South Australia and Victoria,” he said.
Mr Matthews said while the majority of the bank’s clients were managing the prolonged dry conditions in these regions well and remained in overall solid financial positions, Rabobank was offering support where required through the current difficulties.
“This unprecedented and prolonged dry spell has been impacting all farming enterprises in affected areas, but is particularly challenging for dairy farmers.
“Dairy producers are reliant on more expensive purchased fodder and grain, which also incurs the additional cost of freight.
“Further impacting this is the ability to source good quality fodder, which is becoming scarce and costly.
“And when the autumn break arrives in winter, it is often too cold for good growing conditions, further limiting availability of grass.”
Mr Matthews said Rabobank’s rural managers are working closely with impacted farmers to understand the specific challenges they are facing and work on solutions together.
He said as a global specialist in agribusiness, Rabobank takes a long-term view on its clients’ businesses and understands dealing with periods of extreme weather is part of being in the agricultural sector.
Mr Matthews said the bank’s recently-released 2025-26 Australian Dairy Market Outlook found solid fundamentals for the dairy sector — supportive of positive farm gate milk prices, though the bank’s RaboResearch division is expecting local milk availability to tighten in the new dairy season.
“The adverse seasonal conditions have impacted milk flows in western Victoria, South Australia and Tasmania in the 2024-25 season,” he said.
“With national milk production flat year-on-year through March and rainfall deficits persisting, the risk of a production contraction in Australia in 2025-26 remains high, until seasonal conditions improve.”
