Dairy Australia says northern Victorian milk production is set to continue to plummet, as intense heat compounds the effects of high water and feed prices.
Preliminary Dairy Australia figures for December showed a similar drop in production (20-22 per cent) to that in November (20.3pc), compared with last year.
Dairy Australia senior analyst John Droppert said he expected the same trend in national milk production, which dropped 7.8pc in November compared with the previous season.
“Based on early data, the trend from November is going to continue into December,” Mr Droppert said.
He said DA estimated milk production from the north to be 143 million litres, for December, or 900 million litres for the season to date.
“It’s a big drop but something we had been expecting to continue through the remainder of the season,” Mr Droppert said.
A strong end to last season had also influenced the figures.
“It does look even more dramatic, but there’s no point denying it's a pretty substantial drop,” Mr Droppert said.
“There have been lots of exits, a lot of culling and feed and water is very expensive.”
He said the second half of the season wasn’t likely to be any better than the tough first half.
Meanwhile, northern farmers have warned of the long-term impact on production, with reports that many farmers are even offloading replacement stock.
Charles L King and Co auctioneer Brock Fletcher, Echuca, said he sold 1200 cows last week and expected to put another 1000 through the yards, this week.
He said the stock was coming from the Cohuna and Gunbower area, with about 20-30 per cent going to the abattoirs. Cattle were also being bought up by Gippsland producers.,
“They are whole herds. There are several where the whole lot has gone and they are selling all their little heifers, as well,” Mr Fletcher said.
“They are getting out in droves, due to the high fodder and water prices.
“A lot decided to pull the pin, in the last few weeks.”
In the NSW Murray, dairy farmer Lachlan Marshall said he was spending $400,000 month on water, after months of zero allocation of general security water.
Mr Marshall has urged water authorities to improve the allocation, even if it was only by a small amount.
“In my family’s situation we have a dairy farm, and it’s costing a small fortune to buy water so we can grow forage crops for the cows,” Mr Marshall said.
“We don’t have a choice.”
He said was milking 900 cows three times a day, to produce about 12 million litres of milk a year.
“What has happened this season is hard to swallow.
“ At a time when our water allocation remains on zero, we’ve watched unnatural flooding of forests because of water mismanagement.
“My family is being forced to pay more than $400,000 a month for water so we can feed the cows,” he said.
“We have to grin and bear it, but quite obviously it’s not sustainable.”
Steve Hawken, Echuca, milks a 240 strong herd and said the crunch came with the December heatwave, which rolled into January.
“That little period there was what broke many people, which we knew it would,” Mr Hawken said.
“You combine heat and lack of water, which is a dangerous combination, and we have more to come yet.
“The price of water, at $500, is well out of reach of your average dairy farmer; there might be one or two that are committed to a corn crop
“But, other than that, I can’t see anyone paying it.”
He said farmers had faith that something would change, but it appeared processors had not heeded the advice as to which way the season was going.
“They totally ignored what we said would happen.”
He said while production would drop now, there was a long term impact as herds were culled.
“I have trimmed more than I normally would, but I just don’t know where its going to end.
“They (processors) must think it’s going to rain cows, because to get back to the level of production when this started, we are talking four or five years of breeding.
They must think it’s going to rain cows because to get back to the level of production when this started, we are talking four or five years of breeding.
“We have to breed a breeder, to produce another breeder, to start building the herd back up, but we have got rid of a lot of our young stock.”
He said he was concerned farmers were culling too heavily.
“If a cow walks into the yard and looks at you the wrong way, she’s on the truck,” he said.
It’s not only going to be the back end of this season that processors will be fighting for milk. No young stock flowing through will leave a deficit of milk for 2-3 years. It’s not their fault water prices are out of reach, but if they want milk they need to pay now! #toolate— Paul Stammers (@BudStammers) January 31, 2019
He said farmers were now concerned about when they could start watering autumn pastures.
“You can’t give a first watering on $530/ML; you are cutting your own throat before you start.”
He said the prices being offered were not sustainable, in the long term, although farmers were “starting to get a bit of phone time from processors now.”
He said he was concerned that if the industry were to further decline, Australia would have to start importing food.
“We have got the best food in the world, that’s obvious by ther fact every country in the world wants to buy it, but we are going to let it fall by the wayside.”
Mr Hawken took issue at the importation of dairy products.
“Whose in charge here? It’s not just dairy, it’s pork and it’s also oranges.”
Undera’s Gemma Monk said she had culled some excess young stock and was planning to cut back to the bare necessities.
“I've heard of a few people offloading all their young stock; they’re not prepared to feed anything that's not in milk,” she said.
“That’ll affect at least two seasons. Their numbers will be down, and they won’t have the young stock to come through, to replace anything they would normally cull.”
She said she was confident her empty rate in her 700 cow herd would be lower than usual, as she had changed her breeding program.
‘But we will be looking very, very hard at any cow that isn’t a high producing animal and that’s empty.
“If she’s starting to have issues with age or cell count, she will definitely be gone.”
Robert Hobbs, Lockington, said he was likely to cut his herd by another 20, after having to buy water at nearly $550 a megalitre.
“You can’t keep paying that, so I’m a bit limited as to what I can do,” he said.
He said the water would be used to finish off sorghum, but he’d have to make alternative arrangements for annual pastures.
“We can’t afford to put annual pastures in.”
It’s tough out there, few more dairy farms coming on market this week, another dairy had trucks and coppers taking cows.— Luke Felmingham (@LFelmingham) February 5, 2019
“The water is not going as far; we are using more water to irrigate lucerne and sorghum, as it the growth is checked when its knocked around by the heat.
“There is a double whammy on production.”
He said he was growing 20hectares of sorghum and 30ha of lucerne, which he couldn’t afford to lose, as feed was so expensive.
Cowra, NSW’s Colin Thompson said he was making do with what water allocation he had, but grain prices had almost doubled.
He milks a 320 strong herd and said he was paying $450 a tonne for grain.
“This year, the price would be 50 per cent higher than last year, maybe more, although we do grow some of our own and source the rest locally.
“It’s been a very dry and extremely hot summer.”
And David Anderson, Ripplebrook, Gippsland, said while the region had one of its best spring seasons ever, there was still no real money to be made in dairy.
“We reacted to the high grain prices by dropping our grain feeding, but the cows responded by dropping milk production,” he said.
He has a 100 strong herd and had springs on the property, so water wasn’t such an issue.
“We are chasing our tail. The prices are at historic highs.”
Mr Anderson said he bought his grain in pelletised form for $500 a tonne.
“I just order what I think I need, close my eyes and pretend it's not happening to me.
“You have to give them something other than silage or dried, dead old grass.”
Meanwhile, both Bega and Saputo Dairy Australia/Warrnambool Cheese and Butter, have announced step-ups to their farm gate milk price.
An SDA spokesman said the payment of seven cents a kilogram for butterfat, and 14c/kg for protein equated to a 10c kg/milk solids increase, from $5.95 to $6.05kg/MS.
“While world markets have seen some improvement recently due mainly to easing growth in milk production and a reduction in skim milk powder stockpiles in the EU, prices declined across dairy commodities during the first half,” the spokesman said.
“As such, this price increase reflects our acknowledgement that farm conditions remain challenging for our suppliers and any sustained market recovery is still ahead.
“We will continue to monitor the market and review the milk price again in April 2019, in accordance with our quarterly review process.”
Bega announced a milk price increase of 14c/kg milk solids.
Executive chairman Barry Irvin said the increase would equate to farmers receiving an additional $0.096c/kg for butterfat and $0.192c/kg for protein, as a loyalty payment from July 1 last year.
It would be applied as an increase for milk supplied from February 1 to June 30, this year.
“The current industry circumstances are very challenging, across the supply chain,” Mr Irvin said.
“The prolonged drought in almost all of NSW and south-east Queensland has impacted all in the industry.
“Significant cost increases in fodder and water (particularly northern Victoria) combined with dramatically increased costs in electricity have added a great deal of business pressure.”
Mr Irvin said milk production might drop by as much as 500 million litres in the current year, with northern Victorian production expected to be down by as much as 1.6-1.7 million litres.
That had resulted in fierce competition, with all players keen to secure volume.
“We must respond to competition and ensure we are competitive in every region we operate in.”
Competition was particularly strong in northern Victoria, as milk companies sought to procure supply, which was no longer available in NSW and south-east Queensland.
Mr Irvin said Bega was also pleased to see improvement in global markets and a decrease in the relative value of the Australian dollar.
“These changes are positive for our competitive position into the future, and we are beginning to see the benefit of a decreasing stockpile in the EU (skim milk powder) which should see the market increasingly come back into balance, improving the price opportunity.”