Dairying Pulls Profit Out Of Downturn

AUSTRALIA - Drought and farmgate downturns dinted Victorian dairying last year, but many farmers were still able to wrestle a profit out of the conditions, according to an annual Dairy Australia and Department of Primary Industries survey.

3 August 2010

2 minute read

Oceania

Even in the rain-strapped north of the state, many farmers surveyed for the 2009/10 Dairy Industry Farm Monitor Project recorded positive earnings before interest and tax (EBIT).

A total 66 per cent of farms surveyed in the state’s north recorded a positive EBIT. Those in other parts of the state fared even better; more than 80 per cent of participant farms in south-west Gippsland recorded a positive EBIT.

The fourth annual survey collected data from farms across Victoria’s north, south-west and Gippsland. Participants were selected from a range of farm and herd sizes and geographical locations within each region.

The farm monitor project is a financial and comparative analysis of dairy farms. It provides the industry with farm-level data relating to productivity gains and profitability and identifies the key drivers.

Dairy Australia Farm Business Analysis Manager Helen Quinn said the 2008/09 global financial crisis saw dairy prices fall significantly and 2009/10 started slowly with opening prices low, compared to the previous two years.

Average results for 2009/10 were lower than those recorded in 2008/09. Average profitability across the participant farms was $0.68/kg MS, or $507 per hectare, down 37 per cent and 36 per cent respectively on levels recorded in 2008/09. Similarly the return on assets across the state fell from 3.8 per cent to 2.2 per cent year on year.

Comparing return to equity showed that more than half the farms surveyed recorded a negative result. Hardest-hit were farms in the state’s north where more 70 per cent of participant farms made a negative return.

However, the farm monitor project’s latest business confidence survey shows farmers are now feeling upbeat. Earlier this year Dairy Australia’s Situation and Outlook report flagged that 2010 conditions had significantly improved on 2009, which has now been reflected in the results of the farm monitor project’s survey.

“Almost universally they are expecting an improvement in farm business returns for 2010/11,”Ms Quinn said.

“The expected increase in milk price and production, as well as stable feed prices have seen farmers at their most optimistic in the history of the Dairy Industry Farm Monitor Project, now in its fourth year.”

Similar to last year, milk price, climate and water availability were the greatest challenges participant farms saw themselves facing over the next 12 months.

“Longer-term, succession planning was the biggest issue facing farmers,” Ms Quinn said.

To help them Dairy Australia has developed the ground-breaking The People in Dairy program. This project and its website www.dairyaustralia.com.au/thepeopleindairy are the new model in farm labour planning and management.”