Many Australian dairy farmers continue to enjoy a good season, helping them reduce farm input costs
Demand remains solid but production growth is weak
Freight and economic concerns could hit exporters
An industry report looking at the dairy sector’s operating environment has identified low input costs, solid demand and stable production as some of the factors driving confidence and income.
However, Dairy Australia’s latest Situation and Outlook report shows things aren’t quite so rosy globally.
Senior industry analyst Sofia Omsted said good seasonal conditions across much of the country were a key factor in improving operating conditions at the farm gate.
Decent rain has helped farmers increase on-farm feed production, which helps lower operating costs.
“We’ve seen a surge in grain and fodder production and with plentiful pasture grown on farms, demand for purchased feed has really eased across the country which has resulted in an easing of input costs as well,” Ms Omsted said.
Record crop, crisis over in Gippsland
Gippsland dairy farmer Ross Anderson is optimistic despite receiving a lower price for his milk than last year.
Mr Anderson farms at Denison, near Heyfield, and recently recorded the biggest harvest ever from his dry country.
“That has a huge impact on our bottom line,” Mr Anderson said. “The more feed we can grow there the less we have to buy elsewhere.”
He said the industry had overcome its share of setbacks over the past decade, however a fresh outlook was needed.
“I think possibly there was a lot of negativity around dairy … but we need to change that script a little bit. It should be something we should be really proud of,”
“We are producing a great product mostly off pasture, our cows are outside, we are pretty environmentally friendly and trying to do our bit,”
“We need to stop talking about crisis and think about how there’s plenty of opportunities,” Mr Anderson said.
“Two good seasons in a row after years of drought is definitely a much more fun place to be.”
Demand strong but production stagnates
Ms Omsted said the picture was further improved by demand for dairy products from the food service sector recovering.
“Domestic demand for dairy is really quite strong despite the fact we’ve been in the midst of a pandemic,” he said.
However, production is steady with the change in production this season likely to only shift by 1 per cent above or below last year’s levels.
She said factors including labour shortages, farm exits and a smaller national dairy herd are slowing growth.
“In the past few years of really challenging conditions we’ve seen significant culling of our national dairy herd and it’s going to take quite a bit to recover that before we’ll see growth come through.”
Global picture less rosy
While global demand for dairy products remains favourable, there are still a lot of question marks around the industry on a global scale, caused by the appreciating Australian currency and worldwide shipping container shortage.
“It’s a bit of a headache to industry that hasn’t gone away throughout the last year.”
Ms Omsted said the rollout of COVID-19 vaccinations had buoyed market sentiment and driven optimism.
Tasmanian dairy farmer James Greenacre said his optimism was tempered by markets overseas.
“Global dairy prices have been very positive but unfortunately for us the Australian dollar has been strong but we’ll see where the milk companies land.”
“On a farm business basis we’ve just tried to develop the farm where the cost of production is enough to maintain and go forward in different milk price environments,” Mr Greenacre said.
As first-generation dairy farmers, James and his wife Sophie are learning fast with the help of Dairy Tasmania.
They employ nine people and have grown their herd to 1250 cows, having doubled their amount of irrigated land to 300 hectares.
They are part of a focus farm project with a network of farmers and industry experts who review the farm’s production goals and the family’s work-life balance.
“We have altered our farm system, feeding less grain and relying more on grass to feed the cows,” Mr Greenacre said.
Confidence lower in NSW
The lingering impact of the three-year drought still has a hold on dairy farmer’s finances in some regions of New South Wales.
“We’re still playing catch up, things got neglected during the drought because we were spending so much on irrigation and grain,” Hunter Valley farmer David Williams said.
He said maintenance and replacement of machinery had fallen behind.
“At the end of the month there’s not a lot (of funds) left by the time you buy fertilizer and feed.”
Mr Williams said farm expansion was also difficult, as local producers struggle to compete with cashed up Sydney and Newcastle investors.
“If you wanted to expand you wouldn’t be able to afford it, there’s no for sale signs around – they’re selling before properties come on the market,” he said.