Dairy confidence dives amid financial pressure

Seasonal conditions and financial pressures have taken a significant hit on dairy farmer confidence across Gippsland, according to Dairy Australia’s latest Situation and Outlook Report.

Released last week, the report also details findings of the National Dairy Farmer Survey which showed the confidence of Gippsland dairy farmers was the lowest it had been in four years.

Milk price and climate conditions have been identified as the major challenges for farmers on the next six months as 58 per cent of farmers recover from profit levels lower than the five year average.

Confidence of Gippsland dairy farmers is on par with national trends, but has dropped 18 per cent since last year. Only 53 per cent of Gippsland dairy farmers are confident about the industry’s future compared to 71 per cent last year.

In the past 10 years, the only time sentiment was lower than the current figures was in 2013 when positive sentiment dropped to 44 per cent.

Less than half of survey respondents (47 per cent) expect a profit this financial year and the majority are anticipating this to be less than the average over the past five years.

Dairy Australia senior analyst John Droppert said confidence and trust in the industry had plummeted.

“Many farmers across a number of regions continue to struggle financially and the wider industry is facing ongoing frustration and distrust in particular parts of the supply chain.

“This is also being seen in the form of a much greater proportion of farmers switching milk processor over the past year, or wanting to,” he said.

Mr Droppert said farmer confidence had suffered as a combination of seasonal and pricing pressures, and depressed profitability over the past 12 to 18 months.

“The shock and anger generated by the 2015/16 step down, as well as the protracted period of inquiry and pursuit of remedy, are also reflected in this year’s results,” he said.

Mr Droppert said the Gippsdairy region was one of the hardest hit.

Key statistics that emerged in the survey included confirmation that trust in processors had been damaged with 27 per cent of farmers already changing or would like to change processor. Profitability also is at a three year low.

In Gippsland, the survey showed capital investment had decreased significantly since 2016 and only one third of dairyfarmers were likely to invest over the next 12 months.

More than half of the GippsDairy respondents had extended, refinanced or deferred debt over the past year.

One of the encouraging signs was two third of respondents expect production will increase by 2019-20.

A snapshot of the profitability and investment of Gippsland dairy farmers showed:

65 per cent made a profit in 2015-16

47 per cent expect a profit in 2016-17

7 per cent achieved a profit higher than the five year average

13 per cent achieved a profit about the same

58 per cent experienced a profit lower than the five year average.

43 per cent invested on farm in 2015-16

36 per cent intend to invest in 2016-17

The National Dairy Farmer Survey is undertaken to gauge behaviour and attitudes of farmers across Australia. The survey was undertaken in February and March.

Along with a dip in confidence Mr Droppert also said overall, margins had been significantly tighter through 2016/17 and anticipated on-farm profit was expected to be down significantly.

“Many farmers across a number of regions continue to struggle financially and the wider industry is facing ongoing frustration and distrust in parts of the supply chain.

“Notwithstanding the ongoing challenges, the broader market provides grounds for cautious optimism about the season ahead.

“Costs for major inputs remain contained, and current milk price forecasts suggest at least some upside to 2016/7 levels,” he said.

Mr Droppert said farmers were still very concerned about farm gate milk prices after the cash flow challenges of recent times.