Discussion paper outlines impact of water scarcity on dairy industry

By Rodney Woods

The northern Victorian dairy industry is at "pressure point" and water availability will be significantly impacted by increased demand from the horticultural industry according to a discussion paper.

Compiled by Marsden Jacob Associates, the report was prepared as part of the Sefton report into the socio-economic conditions in the Murray-Darling Basin and found pressure is increasing on the dairy industry.

The paper said an increase in horticultural crops was one factor why water availability was declining and that dairy farmers on the Murray River, below the Barmah Choke, in towns such as Cohuna, Leitchville and Kerang, would be most affected because of trade factors resulting in greater competition for water.

It also said larger dairy farms with high security entitlements and access to domestic market contracts that operated new sustainable systems would be significantly more viable than smaller farmers operating less-sophisticated feed systems and who were more vulnerable to international commodity price volatility.

But the discussion paper said there was some upside for farmers who were offered supply contracts from processors that offered premium returns and reduced price volatility.

“These premiums and stable contract prices increase the opportunities for some dairy farmers to develop more intensive annual-based feed systems that incorporate mixed cropping and the ability to build significant feed buffers to reduce the risks of low water availability,” the paper said.

“These opportunities will not exist for all dairy farmers in the GMID, nor will all existing dairy farmers have the skills and capacity to manage these more complex farm systems.”

The paper said those who did not have access to the opportunities would continue to face highly volatile commodity prices.

“In more traditional farm systems, where low prices also correspond with low water availability, the scope that farm systems can be sustained will depend on the length and depth of future milk price falls and the scarcity of water,” the paper said.