New Zealand dairy goods producer Fonterra reported a 3.4 per cent dip in milk production from Australia in November as the drought continues.
The 3.4 per cent drop is based on comparing production to the same month in 2018.
The latest production figures are part of a downward trend.
Production for the 12 months to November in Australia was down 6.7 per cent on the previous period.
CMC Markets chief market strategist Michael McCarthy said falling production was not a surprise given the drought.
Conditions have been dry since 2017, and Fonterra has predicted it will have fewer cows.
Demand for infant formula and skim milk powder from Australia also dropped over the last 12 months.
Mr McCarthy said this decline was more serious and showed the drought could hit Fonterra’s bottom line.
Exports from the country were down 11.5 per cent for November on the same month in 2018.
The situation was not as bleak for Fonterra’s other regions.
Production was up in Europe and the US, and exports from Europe and New Zealand have increased over the last 12 months.
Imports into China continue to grow, up 11.4 per cent for the 12 months to November.
Demand for whole milk powder and fluid milk products was largely responsible.
Fonterra shares on the Australian market had fallen two cents to $3.86 at 11.51 AEDT.