THE annual Dairy Farm Monitor report has revealed that in 2021-22 Victoria’s dairy farmers experienced the fourth best financial returns since the project began 16 years ago. Despite this, and a strong 2022/23 opening price, milk production continues to decline across the region.

Figures are out for the July and August milk production across Australia, and western Victoria is over five per cent down year on year – the equivalent of nearly 19 million litres of milk. This drop is not in isolation, in effect the region has produced nearly 10 per cent less milk for the season so far than it did two years ago. Australia as a whole is down 6.6 per cent year on year, hinting that the national milk pool of just 8.5 billion litres is set to shrink even further.

Whilst seasonal conditions no doubt contributed to part of the decline last year, winter conditions this year have been fairly kind across the dairying region. Instead, the impact of farmers exiting the industry is being felt.

With strong cattle sales and record land prices, many farmers are taking the opportunity to sell up. Whilst some of the sold land is remaining in the dairy industry, a lot of it isn’t. Traditional dairy land is being sold for upwards of $10,000 an acre and being converted to beef, sheep, timber and cropping land.

Many farmers electing to exit the dairy industry are taking the opportunity while they can, not prepared to ride the next downturn. Many have no faith in processors to pay a sustainable price, which is needed to keep up with skyrocketing input costs.

Fertiliser prices have doubled this season, electricity prices are constantly increasing, grain costs are still relatively high and a lot of basic supplies such as silage wrap and even disposable gloves have significantly jumped in price, with suppliers pointing to COVID as the reason for the price hikes.

Interest rates are another cost that has increased significantly, and those with high debt levels are nervously waiting to see where they peak.

Thankfully the milk price paid to farmers is currently at record levels, with the average price being over $9 per kilogram of solids. However, around $2 of that is necessary to cover the increased input costs when compared to previous seasons. 

2021-22 Dairy Farm Monitor Project Report results

Results from the 2021–22 Victorian Dairy Farm Monitor Project (DFMP) report show Victorian participants on average experienced the fourth highest financial returns recorded in the 16 years of the project.

Dairy Farm Monitor is a joint initiative of Agriculture Victoria and Dairy Australia, with financial and physical data gathered from participant farms in Gippsland, South-West and Northern Victoria.

Agriculture Victoria Farm Business Economist, Natalie Nelson, said the average profit in 2021–22 from the 80 participant farm businesses was approximately $384,000 per farm ($1.72 per kilogram of milk solids), which was 45 per cent above the long-term average.

“This strong performance was influenced by a nine per cent increase in average milk price to $7.37 per kilogram of milk solids.

“However, the increased milk price coincided with higher input costs and supply constraints, including labour, feed and fertiliser, which impacted on the overall 2021–22 farm business margins.

“For dairy farms in the irrigation areas of the Goulburn Murray and Macalister Irrigation District, favourable seasonal conditions and lower irrigation costs assisted in strong performances,” Ms Nelson said.

Dairy Australia Lead – Farm Business Data, Helen Quinn, said the results were particularly encouraging with farmers indicating an optimism for farm business returns in the coming 12 months.

“The Dairy Farm Monitor Project is a valuable source of information to the industry, with the annual reports providing comprehensive physical and financial analysis for government and industry decision-makers on the farm-level factors that contribute to profit.

“Australia-wide there are 250 participating farms, with Victoria representing the biggest cohort in the project,” said Ms Quinn.

Ms Nelson said the financial and production information collected in the report enables businesses to effectively track and compare their business performance over time.

“This year many participants reported they had used the favourable milk and livestock prices and cashflows to expand and improve their business, by purchasing land, investing in infrastructure and machinery, resulting in higher business equity.”

The Dairy Farm Monitor report is available on the Agriculture Victoria website at: agriculture.vic.gov.au/dairyfarmmonitor