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Seasonal conditions and farmer resilience lift profit

By Dairy News

The results of the annual Dairy Farm Monitor survey of the state’s dairy farms, funded by Agriculture Victoria and Dairy Australia, have been released.

The 2016–17 Dairy Farm Monitor report shows low milk prices in Victoria’s three major dairy regions put pressure on farm profit margins. Despite this, farm business performance improved slightly across the state with each region increasing average performance measures from the previous year.

For Dairy Farm Monitor participants in Victoria’s south-west, annual average milk price reduced four per cent from 2015–16 to $5.25/kg milk solids. This is the lowest average milk price (in real terms) recorded in the south-west in 11 years of the project and was similar to (but less than) the average price received by south-west farms in 2009–10 (see graph).

South-west participants were able to offset the low milk price by spending less on purchased feed costs than in 2015–16. This reduction was due to lower amounts of fodder and concentrates purchased at lower prices.

With more home grown-feed available, farmers were able to rely less on purchased concentrates and fodder as supplementary feed sources. Farmers took advantage of favourable growing conditions and increased grazed pasture consumption and conserved feed inventory amounts from 2015–16 levels. This saw a 71 per cent decrease in fodder purchases.

All south-west participants achieved positive earnings before interest and tax (EBIT) in 2016–17. The regional average EBIT/kg MS increased to $1.16/kg MS from $0.18/kg MS recorded in 2015–16. In 2016–17 the south-west average return on assets was 4.2 per cent (see graph). This was an improvement on the previous year and similar to the 11-year regional average of 4.2 per cent.

Expectations for the 2017–18 season are optimistic, with the majority of farmers predicting an improvement in farm business returns. Sixty-seven farmers (89 per cent of all Victorian participants) predicted their business returns will improve in 2017–18. This is notably different to the less optimistic expectations recorded in 2015–16.

Copies of the Dairy Farm Monitor Victoria annual report are available for download at: agriculture.vic.gov.au/dairyfarmmonitor or dairyaustralia.com.au/dairyfarmmonitor

• By Sam Henty, farm business economist, Agriculture Victoria