The national milk production pool is expected to drop between three and five per cent in 2019–20 as northern Victoria’s drop in herd sizes and exits from the dairy industry play a major role in the decline.
Speaking post the release of Dairy Australia’s Situation and Outlook report for December, Dairy Australia’s industry analyst Sofia Omstedt said milk production had dropped by nearly one billion litres since 2017–18.
"The ongoing effect of drought and high input costs has seen nearly one billion litres exit the pool since 2017–18 when it was 9.3 billion litres," she said.
"We have seen milk production significantly decline in northern Victoria due to farm exits and decreasing herd sizes.
"The last financial year saw 12 per cent more exit the industry compared to the year prior and there’s anecdotal reports of exits since.
"This financial year, from July to October, we have seen an 8.7 per cent drop in production out of northern Victoria compared to the previous year."
The Dairy Australia publication said water for irrigation is being traded for $529/Ml on average in northern Victoria, an increase of 190 per cent from October 2018.
While, water is being traded on average for $512/Ml in the Murray Irrigation System, a figure that’s up by 164 per cent on October 2018.
Despite water prices rising, hay and wheat prices have reduced but are still historically high.
Dairy Australia anticipated stockfeed wheat to drop 13 per cent to $370/tonne in the 12 months to November 2019, while they expect hay to drop by 30 per cent to $255/tonne.
With weather forecasts suggesting more of the same over summer, Ms Omstedt said the farm-gate price, which is averaging $7/kg of milk solids, would have a bigger impact for some than others.
"The farmers that aren’t quite reliant on buying in feed are able to try and capitalise on the milk price, while those affected by the high prices will continue to face pressures this year."