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Australia's dairy industry is in the middle of a crisis, fueled by an almost perfect storm of challenges.

Climate change and extreme weather have been and , creating mounting financial strains and for many farmers.

Meanwhile, beyond the farm gate, consumer tastes are to a range of dairy substitutes. Interest and investment in is accelerating.

Earlier this month, industry figures to prepare for price rises amid expected shortages of milk, butter and cheese. Already mired in uncertainty, the dairy industry is now being forced to confront some tough questions about its future head on.

Dairy under pressure

Dairy is Australia's . It produces more than A$6 billion worth of milk each year, and directly employs more than 30,000 people.

But the sector has been under sustained pressure. This year alone, repeated extreme weather events have affected key dairy-producing regions in southern and eastern parts of Australia.

In New South Wales, dairy farmers face increased pressure from . In May, many regions had their broken—some by huge margins.

In Victoria, are worsening. Tasmania, too, continues to endure some of the .

Conditions have prompted many farmers to to conserve feed and water.

All of this heavily impacts farm productivity. Agriculture has long been predicated on our ability to predict climate conditions and grow food or rear animals according to the cycles of nature.

As climate change disrupts weather patterns, this makes both short and long-term planning for the sector a growing challenge.

High costs, low profits

Climate change isn't the only test. The industry has also been grappling with concerns.

At the farm level, dairy farmers are feeling the impacts of . Compared to (such as sheep or beef), dairy farms require more plant, machinery and equipment capital, mostly in the form of specialized milking machinery.

The price of milk also has many farmers concerned. The modest increase in farmgate milk prices—just announced by dairy companies for the start of the next financial year—. Some say the increase isn't enough to cover rising operating costs.

Zooming out, there are concerns about a for dairy farms. Many young people are wary of taking on such burdens, and the total number of Australian dairy farms has been in —from more than 6,000 in 2015 to just 4,163 in 2023.

What's the solution?

Is there a way to make the dairy industry more productive, profitable and sustainable? is the national policy and advocacy group supporting the profitability and sustainability of the sector.

In the lead up to this year's federal election, the group to address what it said were key priorities. These included:

• investment in on-farm technologies to improve efficiencies
• funding for water security
• upskilling programs for farmers
• support for succession planning.

However, as the industry struggles to grapple with a changing climate, financial strain and mental health pressures, there should also be , either to farming dairy differently (such as by reducing herd sizes) or exiting out of dairy farming and into something else.

Dairy without the cows

The push to make dairy production more sustainable and efficient faces its own competition. A number of techniques in development promise dairy products without the cows, through —and more specifically, "."

Australian company Eden Brew, in partnership with dairy giant Norco, has plans to produce and commercialize .

And last year, Australian company All G to sell precision fermentation lactoferrin (a key dairy ingredient in baby formula) in China—another animal-free milk product.

It is important to note that for cellular agriculture remains a challenge.

Nonetheless, Australia's rapidly growing non-dairy milk market—soy, oat, and so on—is now worth over . This reflects the global shift towards plant-based options driven by health, environmental, and ethical concerns.

Is there a win-win outcome?

Is there a possible future where more funding is given to produce milk at scale through precision fermentation while we also look after incumbent dairy workers, farms and the rural sector at large to diversify or leave the sector altogether?

Some believe this future is possible. This is what researchers call ""—a market where traditional and alternative proteins coexist. Long-term planning from both the dairy industry and government would be needed.

Remember, while techniques like precision fermentation offer the promise of animal-free dairy products, their benefits are largely yet to materialized. How they will ultimately benefit the whole of society remains speculative.

What we can do now

For this reason, some we should prioritize actions that can be taken now. This includes support for practices such as , which seek to address injustice and inequity in food systems to help empower primary food producers.

A found Australian dairy farmers were interested in financial and technical advice to make decisions about where they take their business in the future.

Despite growing recognition of the challenges facing the dairy sector, responses from government and alternative dairy remain uneven. A more coordinated approach is needed for affected farmers, helping them adapt or diversify with guidance from government and industry experts.