Dairy Farm Monitor Project
The Dairy Farm Monitor Project provides a comprehensive financial and production analysis of approximately 75 dairy farms (25 in each of the three dairy regions - South West, Gippsland and northern Victoria).
Now in its ninth year, the project is a joint initiative between the Department of Economic Development, Jobs, Transport and Resources (DEDJTR) 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.
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 condition 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.
Annual Report 2013/14
Farm profitability showed great improvement on last year, with all participating farms recording a positive return on assets. The 2013/14 year saw favourable seasonal conditions, with above average rainfall for the state.
Milk reached an average price of $6.79/kg MS across participating farms; the second highest average level recorded in real terms in the eight-year history of the project. While grain and water costs increased on last year, farms drew healthy returns from feeding high quality concentrates and investing in home grown feeds. Following a challenging year in 2012/13, many farms were able to consolidate their businesses and attend to delayed capital purchases and repairs.
Following a good operating season, farmer expectations for the coming year are variable. Managing input costs and maximising efficiencies are the major expected challenges going into the next 12 months. However, with a strong opening milk price of $6.00/kg MS; the coming 12 months look positive for farm profitability.
In 2012/13 challenging market conditions saw milk price fall 11% to $4.90/kg MS and grain prices rise by 14% to $336/t DM while drier than average seasonal conditions contributed to lower industry profitability in 2012/13.
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.
Following on from 2010/11, a year that saw the second highest milk price on record and strong returns for farmers across all regions, 2011/12 again yielded a strong milk price, down only two percent to $5.52 per kilogram of milk solids. In Northern Victoria a return to traditional season for the first time in a decade saw farmers in that region make the highest returns since 2007/08. However seasonal conditions in the southern regions conspired to depress returns compared to the previous year.
The 2011/12 feature article identified the factors that enable participant farms to sustain long term profitability.
The 2010/11 year saw a return to form for all Victorian dairy regions. A strong opening milk price, followed by several step-ups helped push the average closing milk price to $5.64 per kilogram of milk solids. Favourable seasonal conditions further provided an improved operating environment in 2010/11 and 72 of the 74 farms surveyed recorded positive profits, with return on assets rising from 2.2% in 2009/10 to 6.2% in 2010/11.
The 2010/11 feature article looked at 'does farm size matter'.
In 2009/10 it was a slow start for the industry, with lower opening milk prices limiting income. However more than 80 per cent of the 71 farms recorded positive return on assets.
The feature article focused on the influence of calving pattern on cost of production, milk price received and overall business profitability.
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 feature article examined the effect of the milk price step downs on participant farms and the management strategies adopted by farm businesses to manage the lower income.
The results from the 2007/08 year reflected the strong world price for milk, and average return on assets across the state was 10%.
The focus of the feature article is on people, and how people are managed on dairy farms.
The results from the 2006/07 year reflected the exceptional seasonal conditions across the state. Average return on assets across the state was 0.1%.