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Dairy Farmers Capitalise On Improved Conditions

03 August 2011

VICTORIA, AUSTRALIA - Stronger farmgate prices and favourable seasonal conditions has seen Victorian dairy farmer net incomes improve significantly on last season to an average of almost A$171,000, according to an annual Dairy Australia and Department of Primary Industries survey.

The 2010-11 Dairy Industry Farm Monitor Project surveyed 74 farmers across the state, with 72 recording positive earnings before interest and tax while 64 recorded a positive return on equity. This is an improvement to 2009-10 when 50 per cent of surveyed farmers recorded a negative return on equity.

The fifth 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 profitability and production and identifies the key drivers of farm performance.

For the average surveyed farm milking about 300 cows with a milk production of 151,554 kg milk solids, the average gross farm income is about $987,000 and earnings before interest and tax is about A$290,000.

Whole farm average net income in the north was A$120,184, which follows a loss of -A$34,868 in 2009-10, while south west Victoria and Gippsland farms recorded average net incomes of A$195,065 and A$195,668 respectively.

The average return on assets was 6.2 per cent compared to 2.2 per cent the previous year and the average return on equity was 7.8 per cent compared to -0.3 per cent. Over the year, costs rose by six per cent which was offset by the higher milk price, however it should be noted repairs and maintenance costs increased by 33 per cent across the state and 44 per cent in northern Victoria. This indicates that with increased incomes farmers are attending to essential repairs and maintenance that have been delayed over the past couple of years due to tight cash flows.

The survey also revealed more than 90 per cent of farmers in northern Victoria intend to increase milk production in the next 12 months. In south west Victoria and Gippsland more than 50 per cent of farmers have the same intentions.

Dairy Australia managing director, Ian Halliday, said the results reflected a good improvement in profitability on Victorian farms following years of challenging seasons.

“These results just go to show how resilient, adaptable, strong and savvy our Victorian famers are after year on year of dry conditions, low milk prices and rising costs where many made a loss,” he said.

“It really is testament to those who can turn their businesses around - many will now be able to consolidate, reduce debt and attend to essential farm maintenance."

“It is farmers like these who believe in the industry and will ensure it has a strong future.”

Results from the project have reflected Dairy Australia’s 2011 Situation and Outlook Report released in May. Mr Halliday said the industry’s position had continued to improve with high international commodity prices, strong 2011-12 opening farmgate prices of A$4.60- A$4.90/kg MS and favourable seasonal conditions across most production areas.

“Victorian dairying regions are enjoying arguably the best conditions for a decade with good export demand growth, competition for suppliers and favourable seasonal conditions,” Mr Halliday said.

“This situation is supported by improved milk prices combined with greater feed availability.”

The Situation and Outlook report also revealed northern Victoria farmers had the strongest intentions to increase milk production in the coming three years, compared to other dairying regions.

“Despite some major challenges with flooding in pockets of northern Victoria, there is a real sense of a turnaround in the region and perhaps a platform for returning to growth with farms re-starting in the area and farmers looking to build up their herd numbers with many culling less and retaining more heifers,” Mr Halliday said.

“Manufacturers are also actively encouraging increased output to fill the region’s factories and satisfy strong export demand.”

Similar to the 2009-10 results, milk price, climate and water availability continue as the biggest issue facing farmers in the next 12 months. For the long term, milk price and input costs are the biggest issue facing farmers while policy decisions around both water and carbon are a major concern to be addressed.

TheCattleSite News Desk



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