VIC Dairy Farm Monitor Project
The Dairy Farm Monitor Project provides a comprehensive financial and production analysis of 75 dairy farms spread evenly across three dairy regions - South West, Gippsland and northern Victoria.
Now in its tenth year, the project is a joint initiative between Agriculture Victoria and Dairy Australia.
This comprehensive report is used by government and industry to inform policy and service delivery to generate economic growth. It also allows farmers within each region to compare their performance, and identify areas for improvement. While the data presents results and trends, these need to be interpreted carefully as participant farms may not be representative of the industry and not all farms participate every year.
Dairy Farm Monitor Project 2015/16
Victoria - Dairy Farm Monitor Project - Annual Report 2015-16 (PDF, 3.3MB)
The 2015-16 season was characterised by dry seasonal conditions, high water costs, reduced pasture availability, higher feed costs, and lower milk prices. Overall, dairy farm profits declined in 2015-16, with data showing average whole farm earnings before interest and tax (EBIT) falling to $70,804, a 70 per cent decrease compared with the previous year. This was the third lowest EBIT level recorded over the ten-year history of the report, while return on assets was 0.6 per cent compared with last year's 5.3 per cent.
For more information see: agriculture.vic.gov.au/dairyfarmmonitor
Previous annual reports
2014/15 Victorian Dairy Farm Monitor Project key points:
- Almost all farms (97%) recorded positive results in 2014/15.
- Whole farm earnings before interest and tax (EBIT) was positive on average, but 34% lower than last year.
- Return on assets under management decreased to 5.3% from 8.5% last year. The 2013/14 year was exceptional on many levels and this needs to be kept in mind when looking at this year's results.
- The decrease in milk price was the primary driver behind the reduction in profitability this year.
- The milk price fell 11% from $6.77/kg milk solids in 2013/14 to $6.04/kg milk solids this year.
- The impact of lower milk price combined with challenging seasonal conditions was reduced due to higher milk solids sold per hectare and per cow and slightly lower variable and overhead costs.
- Variable weather conditions across the state provided between 71% and 95% of average long term rainfall.
- Farmer expectations were variable but a large proportion believed operating conditions would be stable or deteriorate for the 2015/16 season.
- The greatest challenges are still managing climatic variability, sourcing labour and managing the uncertainty of milk price.
Following on from relatively high milk prices in 2010/11 and 2011/12; in 2012/13 the average milk price across the state fell by 11%, from $5.52/kgMS to $4.90/kgMS. Input costs rose during the year with feed costs in particular reaching their highest level in four years. This rise was driven primarily by the increased cost of concentrates which rose by 14% to $336 per tonne of dry matter. Adding to the challenging market conditions, seasonal conditions across Victoria were drier than usual, with lower than average rainfall recorded across the majority of Victoria's three dairying regions severely impacting profits. The combination of challenging market and seasonal conditions saw the average return on assets across Victoria fall from 5.0% in 2011/12 to 0.7% in 2012/13. The range was -11.5% to 10.2%, and 43 of the 75 participant farms had a positive return on assets. A historical analysis over the past seven years of the project showed that the 2012/13 season will go down as one of the most challenging since the drought of 2006/07. In Northern Victoria, real returns dipped to their lowest level since 2009/10 while farmers in the South West and Gippsland reported real returns similar to those recorded in 2006/07.
Following on from 2010/11, a year that saw the second highest milk price on record and strong returns for farmers across all Victorian dairyregions, 2011/12 again yielded a strong milk price, down only two percent to $5.52/kg MS this year. In Northern Victoria a return to traditional seasonal conditions for the first time in a decade saw farmers in that region make the highest returns since 2007/08,however seasonal conditions in the South West and Gippsland conspired to depress returns compared to last year
This year was a return to form for all VIC dairy regions. A strong opening milk price, followed by several step-ups boosted milk income significantly, and with the favourable seasonal conditions, the average earnings before interest and tax across the three regions rose to $1.73 per kilogram of milk solids sold, a 166% increase from 2009/10. The 2010/11 feature article looked at 'does farm size matter'.
It was a slow start for the industry, with lower milk prices limiting farm income. However, the results showed that more than 80 per cent of the 71 surveyed farms still made positive earnings before interest and tax (EBIT).
The year's feature article focused on the influence calving pattern had on cost of production, milk price received and overall business profitability. The article investigated the drivers behind adopting different calving patterns and the effect this calving pattern had on the production and profitability of the farm business.
The drop in demand for Australian export dairy products combined with climate variability, low water allocations and previous high farm gate prices has had a financial impact on farm businesses.
The year's feature article examined the effect of this milk price drop on participant farms and the management strategies adopted by farm businesses to manage lower farm income.
The future of dairying in Australia will see demand for resources such as land, water and labour increase. Farming will require more effective use of resources, including the on-farm people resources. Effective people management is a key to managing a thriving business, however, for some dairy farmers this is seen as a cloud of unknowns and red tape.