Dairy

Thirteen-year low for farm profits in Victoria’s northern dairy region

By Rodney Woods

Farm profits in Victoria's northern dairy region fell to record lows in 2018-19, as dry conditions and high input costs continued to plague farmers.

That's according to Agriculture Victoria and Dairy Australia's Dairy Farm Monitor Project 2018-19 annual report, which said "farm performance in 2018-19 was ‘all about water’ where temporary water allocation prices averaged $416/Ml".

“The profit performance reflects the dry seasonal conditions and high input costs, with many farmers left with a negative net farm income at the end of 2018-19,” the report said.

“Three of the last four years in northern Victoria, (farmers) have recorded below average profits.”

The average net farm income in the northern region reduced from $73,000 in 2017-18 to negative $85,000 in 2018-19.

Earnings before interest and tax reduced from $185,000 to $24,000 across the same period.

The report revealed these were the lowest figures recorded in the project's 13-year history.

UDV president Paul Mumford said the findings were not a surprise.

“I think the industry as a whole knew the industry was struggling,” he said.

“It (the report) delivered what we were all thinking - that the dairy industry has been in crisis for the last 12 months.”

Mr Mumford said the drop in farm profits in the north exemplified why so many dairy farmers were leaving the industry.

“That shows the dramatic problem of the impacts of water are having on local farmers in the northern irrigation district,” he said.

Agriculture Victoria’s farm business economist Claire Waterman said there was a significant variation in profitability across the three dairy regions of Victoria. “The dry conditions have led to a 20 per cent increase in variable costs as a result of higher irrigation water, concentrates and fodder prices,” Ms Waterman said.

“Farmers also spent more on making homegrown feed, including fertiliser, hay and silage making costs.”

In better news, the milk price improved six per cent to $6.13/kg of milk solids compared to the previous year, partially offsetting the increased costs.

Mr Mumford said despite the good news, farm costs eroded the impact of a higher milk price.