The effects of the widespread drought in New South Wales and Victoria have had a significant impact on the dairy sector. Milk production is forecast down 9 percent at 8.52 million metric tons for MY2019. This would reduce the fluid milk available at the factories by 12 percent. Only cheese production is expected to be unscathed at 366,000 metric tons, stable with MY2018. All the other main commodities will suffer reduced production. However, apart from skim milk powder, export volumes of other key dairy categories are expected to be maintained by reducing inventory levels.