The Australian dairy industry is recovering from a period of significant disruption with a spike in exits from the industry. In 2017, farm gate prices and competition between dairy processors for milk supplies have both increased. For 2018, Post forecasts fluid milk production to begin to recover to 9.3 million MT, an increase of 2.2 percent on the low point of 9.1 million MT of the previous year. This forecast assumes average seasonal conditions and good pasture growth. Rising farm gate prices should support continued herd rebuilding and higher milk production. Processors are expected to prioritize production and exports of butter, cheese and infant formula.