SYDNEY, Sept. 11 (Xinhua) -- Australia's milk production is set to fall again this season, as global milk supply surges across other key dairy-exporting regions, an industry report said on Thursday.

The RaboResearch division of Rabobank, an agribusiness financial service provider, forecasted a 1.7 percent decline in Australian milk output for the full 2025/26 season, to reach 8.05 billion liters, following a 0.7 percent year-on-year fall in the 2024/25 season.

The decline in Australian milk production reflected drought conditions and feed shortages, especially in the states of Victoria and Tasmania, with July output down 4 percent at the start of the 2025/26 season, said Michael Harvey, RaboResearch senior dairy analyst, the report's co-author.

"Positively, though, above-average rainfall is forecast by the Bureau of Meteorology across many regions over the next three months," he said.

Meanwhile, very high hay prices were the "main pressure point" for dairy farmers in local feed markets, Harvey said, citing strong demand and limited supply.

The quarterly dairy report noted Australia's farmgate milk prices for the 2025/26 season are around 10 percent higher than last season's closing prices, at 9 Australian dollars (5.94 U.S. dollars)/kgMS (kilogram of milk solids) or higher.

In 2024/25, Australia's dairy exports rose 1.5 percent on the previous season by volume and 12 percent by value, with butter, milk powder, and cheddar cheese shipments all recording double-digit gains, Harvey said.

Globally, milk supply is rising across key dairy-exporting regions, according to the report.

Milk supply across the "Big 7" dairy-exporting regions, New Zealand, the European Union, Argentina, Uruguay, Brazil, the United States and Australia, is expected to increase 1.8 percent year-on-year in the second half of 2025 to peak, before slowing to 1.1 percent year-on-year growth in 2026. ■