The latest Agriculture Victoria Livestock Farm Monitor Project has shown last financial year many of the state's producers achieved their highest average gross earnings in nearly 20 years.
The annual Agriculture Victoria project provided 124 Victorian sheep, beef and mixed farming farmers in Gippsland, northern and south-western Victoria with detailed financial and production performance information.
"State wide average profitability was strong in 2021-22 as 90 per cent of surveyed businesses recorded positive returns," the report found.
"Farm businesses in south west and northern Victoria achieved their highest average earnings before interest and tax (EBIT) in 18 years, while businesses in Gippsland recorded their second highest profits."
The 10-year average for EBIT in dollars per hectare for Gippsland was $175/ha, for northern Victoria it was $154/ha and for the south-west $345/ha.
Those figures were significantly outstripped in 2021-22 - for Gippsland EBIT was $385/ha, northern Victoria reached $380/ha and the south-west hit $542/ha.
The 10-year average for gross farm income in Gippsland was $1035 per hectare, compared with $1419 last financial year.
For northern farms, the 10-year average was $750/ha, jumping to $1125 last year, while in the south-west, the respective figures were $1064/ha and $1473/ha.
High cashflows for many LFMP farmers meant significant expenditure on capital and equipment, as producers swapped out old plant and equipment for new, boosted by low-interest rates and access to pandemic tax concessions.
But with fertiliser costs being the greatest expense, nearly 20 per cent of producers in the north opting not to apply phosphorous and nitrogen to pastures.
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Gippsland
In Gippsland, beef was the dominant enterprise with high prices offsetting decreased beef production, which dropped below the regional three-year average.
Consistent with the trend observed in the other regions, fertiliser was the largest cost, at $153/ha.
Additional freight costs to the region meant that Gippsland farmers paid more per unit of fertiliser than their northern and south-west counterparts.
"Decreases in regional phosphorus and nitrogen application rates helped offset the high fertiliser prices," the report found.
"High fertiliser prices and very wet conditions resulted in the largest proportion of farms not applying any fertiliser in four years."
The shrinking size of the Gippsland sheep flock was highlighted, with below-average stocking rates and sales quantity in 2021-22.
This contributed to a 28 per cent reduction in prime lamb gross margin compared to the three-year average.
Beef and sheep producer, Shaun Beasley, Emu Park, near Bairnsdale, runs 20,000 sheep and 1200 cows, a mix he said he was likely to continue.
"I don't think there is any doubt sheep numbers are dropping - 30 years ago, you would drive between Stratford and Bairnsdale and it was all sheep on the Redgum plains."
He put that down to commodity prices and that cattle were easier to manage.
"East Gippsland was hit hard by Johnes Disease a few years ago, and that cleaned out a few flocks," he said
"People haven't rebuilt those and we have been through a fairly rough drought in 2019-20, so it was probably easier to restock with beef cattle."
Two exceptional and unusually wet springs had also seen producers move away from sheep.
"Merinos don't like paddling around in water - the cattle handle the wet conditions better than Merinos, there is no doubt about that."
The downside was that cattle did not do so well, in drought conditions.
Northern Victoria
The combination of exceptional seasonal conditions and high commodity prices led to average EBIT on northern farms increasing 53pc year-on-year to the highest recorded value in 18 years.
The average beef price received by northern farmers increased 29pc in 2021-22 compared to the previous year.
There was a decrease in average expenditure on fertiliser use, down to $63/ha, with phosphorus and nitrogen application rates dropping below the three-year average as farm managers attempted to offset high prices by cutting application rates.
The survey found 19pc of the northern survey participants did not apply any fertiliser but Helen Cowin, Yandra, Gooram, northern Victoria, wasn't one of them.
She said she'd be applying SA lime in 2023.
"The cartage is probably more than what the cost of the lime is," she said.
"If you don't fertilise, you don't get that continued growth and stability within the roots of the plants, it's better to have them well looked after, all the time.
"It shows in our cattle, I am always very proud of the cattle we present - we have topped the markets, on many occasions
"People might make more per head, but on cents per kilogram we have done very, very well."
The property keeps its best heifers, running 250 breeders, with plans to pregnancy test 119 females in March.
She said she sold Merridale-blood steers in December, 2021, for $2480 a head, and when the next draft went to market "we were staggered at the price increase.
"The June sale just blew us away, it set us in good stead for this year where the prices were down considerably in December," she said.
Yandra made a profit in 2021-22, after years of breaking even - as income was ploughed back into the property on upgrading infrastructure such as water supply.
"We have continually gone around with a list six miles long as to what else we needed to do - but it's nice to cross something off and feel that we are getting somewhere," she said.
South-west Victoria
The south-west saw the highest prime lamb price in 18 years while the fine wool price received was the second highest.
This boosted average gross farm income to the highest levels recorded in 18 years.
High fertiliser prices increased expenditure by 20pc, year-on-year, and was the most significant outlay in a decade.
This was in spite of decreases in phosphorus, nitrogen and potassium application rates.
Beef and prime lamb gross margins increased in 2021-22 to be above the three-year average, while wool sheep gross margins decreased slightly.
Average variable costs in the south west were the highest in 18 years, due to the increased cost of fertilisers and labour.
South west Victoria farm businesses were more reliant on contract labour for shearing and crutching operations than those in Gippsland and northern Victoria, and therefore highly exposed to the changes in costs and availability, the report found.
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Prime lamb producer, Georgina Gubbins, Heywood, said the higher prices gave producers the opportunity to invest in infrastructure.
"Hopefully people have put a bit of money into farm management deposits, because already this year prices are not as good, there has been a slump lately, but so long as people are keeping an eye on their input costs and prioritising where they need to, there is still good money to be made," Ms Gubbins said.
"When commodity prices come down, there is then going to be a squeeze again.
She put the prices down to supply and demand and a good season - "it will be interesting to see what happens in the next five years.
"People are unable to get shearers, so they are talking about going out of sheep."
Resolving the labour issues was a long term problem.
She put the high prices down to supply and demand and a good season.
The LFMP is Agriculture Victoria's primary source of farm-level information for sheep and beef production practices, resource use, and economic data.
Agriculture Victoria said the results of the annual survey provide farm-level data to inform decisions that impact at a farm level and the direction of future policy design, research themes and service delivery programs.
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