Conditions remain favourable, but milk production slows
A wet summer has continued to improve soil moisture levels across most of Australia and boosted summer crop programs.
With a huge amount of feed produced this season, the cost of grain and fodder has decreased, while wet weather has suppressed irrigation water prices.
Given increased feed availability, wet weather and easing input costs, conditions at the farm gate remain favourable.
Despite these improvements, milk production has continued to falter, with growth rates turning negative towards the end of 2020.
Most people can give you one or more reasons why this might be the case — and many of those factors are indeed playing a part.
A key constraint to production growth this year is the lack of available workers.
While labour accessibility has been a challenge for the industry for several years, the COVID-19 pandemic has exacerbated this issue via border closures and movement restrictions.
Without access to international workers, the dairy industry has even fewer staffing options than usual.
In all dairy regions, labour is highlighted as the most significant challenge, as the lack of workers impacts all types of businesses.
Many dairy herds are seeing cuts of varying degrees, influenced in part by a shortage of staff.
High chopper prices have made culling decisions much more acceptable financially, and even where many farmers are holding onto cows aiming to rebuild herds this season, record beef values are slowing this process.
Buying additional heifers has proven uneconomic and thus farmers are relying on replacement calves to come through to expand herds.
Thus, any expansion in Australia’s national dairy herd is being pushed back to future years, and a smaller national herd will limit growth opportunities in the meantime.
High beef prices have also influenced some farmers’ retirement decisions, with some farm exits reported throughout the country.
In stark comparison to earlier years, current exits seem to be driven by farmers wanting to exit on a ‘high’, tipping the market is near a peak.
High land prices, purchase interest from beef and sheep farms, strong milk prices and record high beef prices are all referenced as reasons for choosing to retire at the moment.
While anecdotal reports indicate that a large portion of cows remain in the supply chain, exits do represent some removal of productive capacity, which places an upper limit on milk production growth for this and future seasons.
All the while, a superb spring boosted feed supply across much of the country and saw grain and fodder costs ease.
Widespread rainfall also drove a surge in pasture growth, which reduced demand for purchased feed.
Despite a drop in grain and fodder prices, farmers in several regions have slowed supplementary feeding, in favour of increasing direct grazing as a cheaper feed source.
This is a sensible decision for many; but has had the overall effect of denting feeding rates in some regions and reducing per-cow yields.
In addition, rain during summer impacted the quality of pasture grown on many farms and generated significant weed growth, particularly in Gippsland and western Victoria.
This is also having a negative impact on per-cow production and slowing growth in affected regions.
As Dairy Australia’s upcoming Situation and Outlook report, due for release on March 17, will outline, these factors have weighed on growth prospects this season.
Many of these issues represent longer term challenges for the industry and are not unique for any one year.
On the other hand, the increased profitability that generally comes with lower feed prices and higher homegrown fodder consumption are an important distinction from the tough times experienced all too recently.