Tight cost control pays off

By Geoff Adams

Better performing dairy farms have good cost control and a focus on directing resources to the area of best return.

This was one of the findings of the latest Dairy Farm Monitor Report.

Agriculture Victoria farm business specialist Claire Waterman told a Murray Dairy breakfast the most successful farms in Victoria’s north had incredibly tight cost control and were more efficient in terms of applying resources where they received a return.

‘‘Attention to detail is excellent in knowing where they can generate a return,’’ she said.

‘‘Farmers in the top group focus on profits too and seek out advice from trusted advisers.’’

She said they sought out better milk prices, matching their production cycles to the best available price packages offered by processors.

‘‘It’s not the case that one factory offers one price.’’

Ms Waterman said water remained a continuing unique challenge to farming in the north.

‘‘Water has a definite impact.’’

Farmer Tom Perry raised a question about the number of farms considering exiting the industry and said he believed the numbers were higher than in some periods of prolonged drought.

A national farm survey has reported up to 20 per cent of farmers had considered leaving the industry in the past 12 months.

Speaking later to Country News, Dairy Australia industry analyst John Droppert said figures were not yet available on exits from 2017-18, and he urged caution around interpreting the survey.

‘‘There may be some farmers who have money from the Murray Goulburn sale who may be considering paying down their debt or leaving,’’ Mr Droppert said.

‘‘In terms of the cost squeeze, there may be a feeling of: ‘here we go again’.

‘‘It’s not the same as 2006-07, but there may be some attrition going on.’’

The farmer confidence survey discovered that up to 20 per cent of farmers had considered leaving the industry, but Mr Droppert said this did not necessarily translate as actual exits.

The Dairy Farm Monitor Report found the 2017-18 season presented challenges for farmers in the north, yet it was better than the previous year with good pasture growth, higher milk production and improved milk price.

Farmers who acted early in the season were rewarded as the price of water and feed increased towards the end of the year.

The 11-year average of allocation water price on the Greater Goulburn system is $164/Ml in real terms.

A 14 per cent increase in milk price to $5.87/kg MS supported a positive return on total assets of 2.5 per cent and earnings before income tax increased to $185000, the sixth highest recorded in the 12-year history of the project. Return on equity returned to positive values, posting 1.2 per cent in 2017-18 and net farm income was $73000.