Dairy impact of water loss underestimated, says UDV

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VFF UDV president Bernie Free says the dairy impacts of water loss have not been properly assessed.

The Federal Government has been accused of ignoring the impact changes to the Murray-Darling Basin Plan will have on the dairy industry.

The Victorian Farmers Federation’s United Dairyfarmers of Victoria president Bernie Free said data used by the Federal Government to justify its transition support in the face of water buybacks did not go far enough in demonstrating the real impact on milk production in northern Victoria.

“The Commonwealth’s ABARES report found if they buy 225,000 Ml of water there would be $110 million lost each year in production. This is substantially underestimated for three reasons,” Mr Free said.

“Firstly, ABARES underestimated the volume to be purchased by 45 per cent.

“Secondly, ABARES did not calculate the costs of lost dairy processing jobs and thirdly, ABARES did not calculate the additional cost to dairy of having even less water when the next drought strikes.”

Mr Free said dairy had not been analysed as an industry on its own.

“Rather, it’s been grouped with all those producing pastures. The report admits this shortcoming but offers no justification for why dairy water use data, which is readily available, was not incorporated into the analysis.

“This failure means impacts on dairy water use have not been accurately assessed.”

“The flow-on impacts of less milk to dairy manufacturers have also been omitted, meaning we are not seeing the full picture of how these buyback scenarios will affect the dairy industry, related communities and the wider economy.”

The VFF UDV said independent Economists, Frontier, found in 2022, the basin plan alone had already reduced milk production in northern Victoria by 400 million litres.

“The dairy industry underpins jobs in rural communities, jobs on farms and in dairy processing and this has been forgotten by the Commonwealth Government,” Mr Free said.

“The dairy industry employs close to 3000 people on farms and 3500 in dairy processing across the 11 dairy factories, plus a further 6200 people work in related dairy industry activities across northern Victoria.

“Nowhere else in Australia do we have this number of dairy processors. Their decision to invest in northern Victoria has been underpinned by reliable milk production made possible by the high security of Victoria’s water.

“With over one million megalitres no longer available to agriculture, because of the basin plan, dairy farmers are feeling worried, particularly when the next drought hits, we know there just won’t be enough water to go around.”

A 2020 report by ABARES found that seasonal conditions are the primary driver of annual variation in water prices, and more frequent dry years are the main cause of the trend towards higher water prices in recent years.

“ABARES analysis finds, however, that recovering water through buybacks or on-farm irrigation efficiency projects puts upward pressure on water prices, adding an estimated $72 per megalitre per year to water allocation prices in the southern MDB,” the report said.