Difficult conditions for dairy farms

The results of the most comprehensive annual survey of the state’s dairy farms will come as no surprise to the farmers themselves.

The annual Victorian Dairy Farm Monitor report has shown that the challenges faced by dairy farmers during the 2015-16 financial year have impacted on their profitability with an average fall of 70 per cent in real earnings.

The Dairy Farm Monitor has been sampling farm outcomes across the major dairying regions of the state for ten years, and, funded by Agriculture Victoria and Dairy Australia, is held as a national benchmark.

The perfect storm of lower milk prices, low rainfall, high water costs, reduced pasture growth, higher feed costs, is reflected in the report’s findings which show 40 per cent of farmers surveyed did not record a positive return on assets.

The geographical spread of farms within the region resulted in a large variation in individual farm performance.

Participant farms in Gippsland held their per cow milk solids production but decreased their milking herd size by four per cent.

Farms received 85 per cent of long term rainfall however the timing of the rainfall events was critical.

Farms in the Macalister Irrigation District (MID) were able to access irrigation allocation, compared with non-irrigated parts of the region which felt the impacts of the failed 2015 spring.

Home grown feed decreased to 59 per cent of metabolisable energy consumed.

The overall lack of pasture growth combined with reduced fodder conservation led to an cost increase of 61 per cent more fodder being fed and purchased than last year.

The lower profit performance of Gippsland farms in 2015-16 was the result of a 10 per cent decrease in milk income to $5.28/kg MS and a six per cent increase in costs due to managing difficult seasonal conditions.

Sixteen of the 25 farms recorded positive EBIT with an average of $72,312/farm compared to $248,948/farm last year.

Return on assets decreased from 4.7 per cent last year to 1.3 per cent this year to be the most positive result of all regions in 201516.

As in previous years Gippsland profitability is mainly driven by milk price as shown by the historical return on assets and milk price graph below, however seasonal conditions, increased costs, availability of feed and other factors play a role in determining the level of profitability.

Given the complexity of the challenges ahead, the report found three in four farmers expect their business returns to deteriorate in 2016-17 with the majority predicting lower milk prices and higher input costs will lead to a further reduction in profits.

Milk price, succession planning and water were the main concerns farmers identified over the longer term. Copies of the Dairy Farm Monitor Victoria annual report 201516 are available for download at www.agriculture.vic.gov.au/dairyfarmmonitor

The Dairy Farm Monitor results in Gippsland will be presented at a session at Agriculture Victoria at Ellinbank on Wednesday, October 19 between 12.30pm to 1.15pm.