Future uncertain for south-west dairy farmers

The Victorian milk price soared in the 2022-23 financial year, hitting an average $9.77 per kilogram milk solids according to a survey by the state government and Dairy Australia. It's the highest price the survey had recorded in its 17-year history.

Kirkstall dairy farmer Chloe Brown said it had undoubtedly been a good year.

"We personally have made money, but then we've also made money in the past four years," Ms Brown said.

"It's been a good few years."

Garvoc dairy farmer and Moyne Shire councillor Daniel Meade also said things had been good recently.

"It was an overall positive year for us," Mr Meade said.

"Fortunately milk prices were at record highs as the market demanded so as to help offset the rising input costs."

Ms Brown said the strong milk price had somewhat concealed the spike in overheads, and farmers would have to be careful not to get caught out if the price dropped.

"All input costs have gone up, some more drastically than others," she said.

"Some things you can't control. Power has gone through the roof, interest rates are through the roof, and we have no control over those things, so it's about doing what you can to keep your other inputs down.

"Even when the milk price was terrible, five plus years ago, if you have low input costs and cost of production is less than the milk price then there's money to be made.

"For us that means getting the basics right, getting our fertiliser and grass right which means the cows are happy and cost of production is low."

Ms Brown said the challenge in good years was keeping the business sustainable if the market or conditions changed.

"Basically, the milk price doesn't need to be as high as it's been, but you're also not looking at a continual upward trend. We're erring on the side of caution with potential tough years ahead," she said.

"You've got to build a future downturn into your margins."

While the record milk price is locked in until mid-2024, the risk of a downturn for producers is real. The climate and the market both loom as potential problems.

The Bureau of Meteorology announced in September Australia had entered its first El Nino since 2015, with unseasonably hot, dry conditions almost certain in the coming summer. Mr Meade said preparation was the key to maintaining milk production throughout the next year.

"The aim for us is to try and conserve as much fodder as possible whilst still feeding the cows fully and also plant summer forage crops early to try and capture the existing soil moisture," he said.

Ms Brown said her farm wasn't irrigated. "We need rain and we need it at the right times," she said.

"We've already forward planned for not getting enough silage this year. We've purchased hay from our usual supplier, that's locked in.

"Then it's a question of: do we pull numbers and feed what we can properly. You have to have that nice level of doing the number of cows you have well.

"We've got too many excess calves right now, so we have to re-evaluate how many calves to rear, especially when the meat price is no good."

And while climatic conditions may push input costs up for many farmers, the milk price could be on the way back down by mid-2024.

"At the current milk price, we're probably getting $2 to $3 more than what it's selling for in the global market," Ms Brown said.

"That's the risk processors take, but next year they get to reassess that, so an adjustment is probably coming."

Australian milk production has dropped significantly since the 2000s, down from 11 billion litres per year to just 8 billion. This may have helped producers get a better price per kilo, but Ms Brown said it was good to see the output stabilise.

"The market won't work without processors having enough milk coming in and being able to sell it, you still need investment in that side of the industry," she said.

The consequences of sliding supply have played out in just the past year, with Saputo closing its Maffra processing plant and "streamlining" its Leongatha and Mil-Lel operations. The Standard this week reported fears Saputo would shut down its Allansford plant if enterprise bargaining didn't go its way.

Mr Meade said he hoped the milk processors had managed to find an equilibrium.

"The south-west dairy industry produces quality milk that is sustainably sourced," he said.

"Hopefully the processors now understand that the level they need to be at to maintain a strong local dairy industry."

Mr Meade said staffing was an ongoing issue that would become more difficult in trying economic circumstances.

"It's important for dairy that access to international employees remains an option," he said.

"There are also many opportunities for young local people to enter the dairy industry and build a rewarding career with lots of options. The industry collectively could improve the promotion of a career in dairy with a positive focus on the benefits to new entrants."

Both Ms Brown and Mr Meade said they were positive about the future despite the likely headwinds to come. Ms Brown said preparation was the key.

"Every single farm will have very different levers to pull at any one time," she said.

"For us it's about our reserves and what our ballparks will be with rain. It's all about balancing your long term cost of production so you're not at the mercy of the market and the seasons."

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