Report highlights dairy challenges

07 Sep, 2018 11:50 AM
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While the season was challenging, milk price improved by 15pc on average to $5.81/kg MS...

Profit on Victorian dairy farms fell in 2017-18 to the fifth-lowest level in 12 years.

But the 2018 Dairy Farm Monitor Report released on Wednesday found return on total assets was constant.

Agriculture Victoria farm business specialist Claire Waterman said the results reflected the challenging seasonal conditions, despite improved milk prices.

The report also revealed differences between regions.

Ms Waterman said return on total assets (RoTA) remained constant at 2.5 per cent across the state on average.

This ranged from 3pc in Gippsland to 2.5pc in Northern Victoria and 1.9pc in Western Victoria.

“Average profits remained comparable with the 2016-17 year with whole farm earnings before interest and tax (EBIT) decreasing to $159,000, compared with $167,000 reported in 2016-17," Ms Waterman said.

In 2017-18, 60 of the 75 farms recorded a positive RoTA.

The largest loss was -5.3pc and the highest return was 10.6pc.

“While fewer farms recorded a positive result compared with the previous year (67 of the 75 farms), the range was narrower this year,” Ms Waterman said.

“When interest and lease costs are considered, farm profits fell to their fifth lowest level in the project’s 12-year history at $49,000 as measured by net farm income and return on equity at 0.4pc.”

Ms Waterman said all Victorian dairying regions had had challenging seasonal conditions in 2017-18, with reduced rainfall compared with the previous year resulting in decreased home-grown feed as a percentage of metabolisable energy consumed.

Farms fed additional imported fodder, at generally higher prices, and utilised their feed reserves to manage the long, dry, hot summer.

"As a result, purchased feed and agistment costs increased by 16pc across the state, from $1.55/kilogram milk solids in 2016-17 up to $1.80/kg MS in 2017-18.”

She said while the season was challenging, milk price improved by 15pc on average to $5.81/kg MS, up from $5.07/kg MS and was the seventh highest price in the 12-year history of the project.

Ms Waterman said farmers’ expectations about their business returns for the 2018-19 season were cautious.

“While over two-thirds of farmers predict their business returns will improve, many participants were concerned about seasonal variability in the coming year," she said.

"Input costs were the major issue identified for the coming 12 months, while milk price and climate variability were also identified as concerns over the longer term.”

The Dairy Farm Monitor Project provides farm level data relating to dairy profit and production in Victoria and was produced for the 12th time this year.

The project is a joint initiative between Agriculture Victoria and Dairy Australia.

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