DAIRY BOOM
The cream is rising to the top for dairy farmers this year who are relishing in high milk prices and product demand.
The record opening prices has been the backbone for renewed optimism and confidence.
And the sentiment is no different in Gippsland, where 92 per cent of farmers are optimistic about their 2021/22 profits.
However, concerns about high production costs and labour availability have continued to undermine the positive outlook.
The major milk companies have delivered good news to suppliers in a wave of announcements that have been within the $8 to $9 per kilogram milk solids range.
Saputo Dairy Australia was the latest to put its opening prices on the table last week and at $8.50 per kilogram milk solids, it was significantly higher than last year’s $6.55 season opener.
Fonterra Australia previously announced an opening weighted average farmgate milk price of $8.25/ kg milk solids while Burra’s 2022/23 opening price was set in the $8.20 to $8.60/kg range.
Continued high prices and record opening prices increased positivity amongst Gippsland dairy farmers with the latest Dairy Australia Situation and Outlook report showing an upward trend in the Gippsland region.
In 2020/21, 87 per cent of GippsDairy businesses made an operating profit and 92 per cent are optimistic about profit expectations for the 2021/22 financial year.
The Gippsland snapshot for the past year also showed herds increased 31 per cent and 29 per cent of farmers expect further herd growth in the next two years.
The report also revealed 82 per cent of dairy farmers are confident about the future of their own businesses (up by two per cent on 2021), while 68 per cent of farmers are feeling positive about the future of the industry (up four per cent).
For young farmers Bryce and Gill Templeton of Trafalgar, it has been a golden time to enter the industry. Starting out just two years ago, they admit they are enjoying the heyday of high prices.
“We haven’t had a down time since starting. Everyone talks about the bad times but we, touch wood, haven’t had any yet,” Mr Templeton said.
Their decision to enter the dairy industry was largely driven by the opportunity to purchase more land and have a farm life for their young family.
So far, it isn’t a decision they’ve regretted. But, from listening to other seasoned farmers at industry support groups, they know they have to prepare for the bad times, because trends indicate, they will come.
“A lot of those farmers crunch the numbers down to every cent. We haven’t had to do that yet, although input costs have increased considerably - two years ago fertiliser was $600 a tonne, now it is $1600 a tonne.
“We just have to be prepared if it does change. Both of us can have off-farm income which helps, that gives us a fair bit of stability.
“I guess you can farm to the worst conditions and if you get the best then it’s a bonus. We like to sit in the middle of that,” Mr Templeton said.
Dairy Australia’s latest Situation and Outlook Report indicated the season was opening with large numbers on both sides of the ledger.
Opening milk prices have set new records and backed by stiff competition for milk and robust global markets, there is a sense of optimism. But, with fertiliser, fuel and grain prices on the up and ongoing disruptions associated with COVID are causing farmers to remain wary.
Dairy Australia’s industry insights and analysis manager John Droppert said after successive seasons of recovering profitability, the net effect of rapid and substantial changes on margins is a key question as farmers and processors try to plan ahead in a volatile market.
Mr Droppert said the report confirmed dairy commodity markets remained strong, driven by a combination of tight supply, robust demand and buoyant soft commodity values.
“The 2022/23 season will be marked by rising numbers throughout the supply chain – from production costs to farmgate prices, from commodity values to food expenditure. Meanwhile, labour shortages remain a significant constraint, while high beef prices and soaring land values have enticed farmers and farmland away from dairy,” he said.
Domestic consumption volume has shifted from grocery to foodservice as the effects of the pandemic recede and more consumers are out and about. The value of dairy products sold through supermarkets has increased.
The report also found Australia’s major competitors are experiencing negative or slow growth in milk production, driving up demand and competition.
“This theme is likely to be tempered by an absence of growth in milk production,” Mr Droppert said. “Nonetheless, robust balance sheets after several profitable years might just mean that the volatility accompanying such giddy numbers is something the Australian dairy industry is well-placed to tackle.”