Average incomes for Gippsland dairy farmers participating in the Dairy Farm Monitor Project were the second highest in 17 years, but that had to be balanced against a big increase in costs.
The latest project report found that variable costs in 2022-23 were the highest in 17 years of the project.
Profitability for the Gippsland participants was strongly influenced by the very high milk price (second highest on record accounting for inflation).
Increased feed costs were the main contributor to a large increase in costs for Gippsland participants in 2022-23.
Homegrown feed costs increased due to a combination of increased costs for fertiliser, irrigation, hay and silage making, fuel and oil, and pasture improvement.
A $0.64/kg MS increase in concentrate costs pushed up feed costs to $2.79/kg MS in 2022-23.
More concentrates were fed per cow (16 per cent increase) at higher prices per tonne (21 per cent increase).
Fodder costs remained unchanged between years. The wet conditions required farmers to purchase more silage for their milkers.
Herd costs increased in 2022-23 with a focus on sexed semen and using herd testing for selection of the future milking herd.
Shed costs increased in the last year mainly due to an increase in costs of dairy supplies, with a minor increase in shed power.
Many farms supplemented their energy requirements with solar generated electricity.
On the income side, in 2022-23 average gross farm income was the second highest in 17 years for Gippsland participants increasing 31 per cent from the previous year.
An increased use of supplements (16 per cent increase) at higher per unit price (concentrates, silage and hay) to manage challenging seasonal conditions and lower homegrown feed production.
The report noted strong returns allowed for investment in land and capital purchases.
Gross farm increased to $10.47/kg MS (31 per cent increase) boosted by a 35 per cent increase in milk price to $9.63/kg MS.
Livestock trading profit declined by four per cent to $0.80/kg MS, while other farm income made up $0.04/kg MS on average.
Escalating costs dampened the effect of the high gross farm income on profits in 2022-23.
The average return on total assets was 6.9 per cent, and was the second highest in the 17-year history of the Dairy Farm Monitor, well above the long-term average of 4.1 per cent.
The average return on equity for Gippsland participants was 12.1 per cent and was the third highest over the history of the DFM in Gippsland. The long-term average return on equity is 4.5 per cent.
As for outlook, in Gippsland, participants expected stable returns in the coming year and had similar expectations for production (milk and fodder) and costs to be stable also.
The biggest concerns for Gippsland farmers were labour and input costs.
The project is a collaboration between Agriculture Victoria and Dairy Australia.
Now in its 17th year, the project provides industry and government with farm-level data to inform targeted strategy and decision making.