South-west dairy farmers are counting the costs of a lacklustre year with a new report showing their earnings were almost half the previous years.
The Dairy Farm Monitor Report, released on Wednesday, found that south-west profits decreased in 2017-18 with earnings before interest and tax falling from $259,000/farm last year to $147,000/farm.
While milk price improved eight per cent up to $5.80/kg MS, it didn’t compensate for the steep rise in feed costs.
Farmers were forced to supplement their lower pasture production with additional fodder purchases and utilised their fodder.
The south-west experienced the extremes in seasonal conditions with a wet winter before a long, hot, dry summer.
The report found that return on total assets in the south-west fell from 4.2 per cent to 1.9 per cent. Average net farm income also halved to $24,000/farm and return on equity to negative1.1 per cent.
Agriculture Victoria farm business specialist Claire Waterman said the results reflected the challenging seasonal conditions, despite improved milk prices.
“Return on total assets (RoTA) remained constant at 2.5 per cent across the state on average, however, there is notable variation between the regions,” she said. “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.
“In 2017-18, 80 per cent of participants (60 of the 75 farms) recorded a positive RoTA, with a range of negative 5.3 to 10.6 per cent,” she said. “While fewer farms recorded a positive result compared with the previous year (67 of the 75 farms), the range was narrower this year.
“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 0.4 per cent.”
Heathmere dairy farmer Casey Taylor said a dry autumn and wet July and August contributed to a tough nine months. He said while their fodder growth rates were down, they were fortunate to have silage reserves on the farm. He said they had bought less than 80 tonnes of vetch for their 500 cows, which wasn’t in the budget.
He said he was content with milk prices. “We’ll always take more money but I think there’s a fair margin in the current prices with a fair season,” he said. “If it’s a cut off spring it’s going to be interesting. If we can have an average spring and an average silage harvest on this farm for us the milk price is sustainable.”