EU-Australia dairy access advances as beef remains the harder trade issue
The EU-Australia free trade agreement offers European dairy exporters better access, particularly for cheese, while opening limited quotas for Australian products. Industry analysis suggests the commercial impact will remain modest on both sides, in contrast with the greater controversy surrounding beef.
Dairy provisions draw a calmer response than beef
The free trade agreement signed by the European Union and Australia in late March has exposed a clear divide between agricultural sectors. While European beef producers are concerned about greater Australian competition, the dairy provisions are being received more positively in Europe. A June market report from Chambers of Agriculture France said the agreement should create additional export opportunities, especially for European cheese.
Australian dairy organisations take the opposite view. They describe the agreement as unfair to a sector already weakened by a long decline in farm numbers and the dairy herd. Australian milk production has continued to fall despite productivity gains, under pressure from low downstream prices, drought-related costs, labour shortages and difficulties replacing ageing farmers.
Producer milk prices rose as supply contracted, reaching about US$47 per 100 kg in 2024, slightly below the EU level. Price formation remains deregulated and varies according to the milk’s use. Industrial milk is valued by fat and protein content, while drinking milk is priced by volume.
European cheese gains wider access
The EU already sells considerably more dairy products to Australia than it buys from the country. In 2025, EU shipments to Australia were worth €350 million to €400 million and totalled about 60,000 tonnes, half of them cheese. Those sales represented only 1.7% of total EU dairy exports, confirming Australia’s status as a secondary market.
Australian dairy sales to the EU amount to just A$25 million to A$30 million a year, equivalent to €15 million to €18 million. The European market is geographically distant, structurally in surplus and was relatively protected before the agreement. Australia is nevertheless highly exposed to international markets: around 70% of its milk collection is linked to global trade, including 36% exported mainly to Asia.
Most Australian dairy categories were already open to European suppliers, but cheese retained meaningful protection. The agreement introduces an 11,500-tonne tariff quota for cheese, with a duty of €0.055 per kg inside the quota and €0.75 per kg above it. All remaining duties are due to disappear within three years. Australia will also recognise and protect about 400 European geographical indications, including 24 French cheeses.
Brussels estimates that EU cheese exports could rise by as much as 48%, generating €28 million in annual tariff savings. Chambers of Agriculture France cautioned that the estimate is based on a 2017 study conducted before the current decline in Australian cheese consumption. Raw-milk cheeses also face consumer resistance and biosecurity restrictions that lower tariffs alone will not remove.
Quotas limit Australian gains in Europe
EU market opening for Australian dairy will come through zero-duty quotas and gradual tariff removal. Duty-free volumes include 5,000 tonnes of butter, 8,000 tonnes of skimmed milk powder and 2,000 tonnes of whey. Two preferential cheese quotas will also move to zero duty, while other tariffs will be eliminated within three years.
The volumes are small relative to the EU market. The skimmed milk powder quota equals 1.1% of European consumption, while the butter quota represents only 0.25%. The French report therefore expects no significant new outlet for Australian dairy suppliers.
Competition remains focused on Asia and Australia
About 40% of Australian milk collection goes into cheese, with much of the balance used for commodities such as cheddar, butter and powders. Processors say farmgate milk costs stand 30% above international benchmarks, weakening export competitiveness. New Zealand remains Australia’s main rival in Asian markets and is also the leading foreign dairy supplier to Australia, ahead of Europe.
Italy, already the leading cheese exporter to Australia, may gain more than France. Yogurt and ice cream could offer alternatives, although Lactalis and Danone already manufacture those products locally. Chambers of Agriculture France consequently expects the agreement to support some European sales without changing Australia’s secondary importance. Australian industry estimates that concessions on geographical indications could cost as much as A$95 million, or €58 million, annually. New Zealand may also seek better terms because the EU granted Australia duty-free butter and powder quotas while comparable quotas in its own agreement remain subject to duties.
