NEW survey data reveals that only 45 per cent of dairy farmers nationwide are anticipating making a profit this financial year.
Dairy Australia Managing Director Ian Halliday revealed the gloomy figures during Senate estimates hearings in Canberra last week, saying more data would be released in coming weeks in the farm levy organisation’s ‘Situation Outlook’ report.
Mr Halliday said every 12 months his group conducted a national survey of 1000 dairy farmers across all regions around Australia.
“It is quite a detailed document that we are about to release through an initiative we call ‘Situation Outlook’ in a couple of weeks’ time,” he said.
“But the headlines would be that in 2015-16, of these 1000 farmers we asked, about 62pc made a profit and 45pc anticipate making a profit in this current financial year, 2016-17.”
Greens Senator and agricultural spokesperson Janet Rice said “They are some very disturbing figures - certainly tough times for dairy farmers”.
Mr Halliday said the result was not just about milk pricing.
“As I alluded to probably back in February, 2015-16, particularly in southern states, was a particularly dry period, so a lot of farmers in the southern regions went through a very dry period,” he said.
“And then of course we had the reductions in milk price - so, it has been a continuation on.
“In the northern part of Victoria it was very wet in spring.
“So, it has been particularly challenging for a number of regions and a number of farmers.”
Senate estimates also discussed the impacts of Murray Goulburn shutting down three factories recently, resulting in 360 job losses.
Mr Halliday said from Murray Goulburn's perspective, a commercial decision had been made but “absolutely we are empathetic that it is a terrible impact as far as local communities and employees”.
But he said ongoing investment was still taking place in the Australian dairy industry.
“In northern Victoria, Fonterra are starting up a new cheese factory in Stanhope in the next couple of months; in south-west Victoria, Midfield Meat is starting up a new factory in the next couple of months; and I think Saputo are also starting up additional facilities at their Warnambool facility,” he said.
“So there is still ongoing investment within the processing sector, so there is still a lot of competition for milk.”
He said global dairy demand continued to grow at about 2pc per year but local milk production was down again on volume.
“I think one of the challenges that we have as an industry is how we get profitable milk volume growth that then supports demand,” he said.
“We are forecasting, in just the most recent numbers that we have seen on milk volume that we will finish this year between 7pc to 8pc down on the prior year and the prior year, we were down about 2pc on volume.
“That is a lot of milk gone.
“We bottomed out at the end of 2009 - well, we thought we had bottomed out - at about 9 billion litres.
“This year, we will probably be down to about 8.8 (billion litres).”
Mr Halliday said the volume reduction was due to seasonal conditions, milk price, confidence in the industry for farmers to invest, the culling of cows and responding to market conditions.
But he said in the past six to eight months - putting aside northern Victoria and wet conditions there - most regions have had “a pretty good season”.
“We have come off 7pc to 8pc we would probably expect a better uplift next year of about 3pc and then we will continue at the historical trend of about 1.5pc,” he said.
“But back to my original point - and this is where we put a lot of emphasis and focus - if we can help farmers become more profitable, then the volume growth will come through and the industry will continue to be attractive from an investment perspective.”
Senator Rice also asked whether Dairy Australia was looking at industry trends relating to the impact of global warming.
Mr Halliday said “We are doing a lot of modelling in that regard to help farmers deal with climatic events”.
Senator Rice also questioned whether programs existed to help farmers with reducing energy use or using fossil fuel sources, in energy intensive production systems.
Mr Halliday said, “We are looking at decision-making, particularly around farm systems and how they can deal with things like heat stress and how they can take costs out”.
“It is not just about energy usage, but the heat stress that cows suffer is an issue across all regions of Australia,” he said.
“We are doing a lot of work around how we can identify markers within the cow-bovine and how cows respond to heat stress and also on what sorts of farm systems can be applied or adopted to minimise the impact of heat stress, because it is a big issue for productivity.”
Farmers pay $34 million to Dairy Australia through a levy based on milk production, with the federal government providing $19m in matching payments for eligible R&D programs.
Mr Halliday said Dairy Australia also continued to roll out its Tactics for Tight Times and Taking Stock initiatives and since June last year 174 events had been held, with 1451 attendees, of which nearly 900 were farmers.