Dairy farmers site climate as their key concern, as La Nina eases

The survey, of 700 farmers around Australia, saw that figure jump sharply from 27pc, in 2022.

The Bureau of Meteorology is forecasting a 50pc chance of an El Nino event forming, later this year.

"Three consecutive La Nina years brought their fair share of challenges, but at the same time, many farmers are understandably nervous about a transition to drier El Nino conditions," the report found

"Fortunately, this period of wet weather has had important benefits in building up resources that will likely take the edge off input pricing and market challenges as we transition to a likely drier season.

The El Nino suppresses rainfall across eastern Australia, during winter and spring.

While this would cause drying, DA found there would still be plenty of irrigation water, with temporary prices expected to stay low.

"Even with no further rainfall for 2022/23, strong carryover reserves are expected to support high seasonal determinations across northern Victoria and the NSW Murray in the approach to July.

"A solid autumn break and more attractive fodder returns for growers should produce a rebound in national supplies," the report found.

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Dairy Australia analyst Eliza Redfern told the annual situation and outlook breakfast, in Melbourne, 84 per cent of farmers were feeling positive about their farm businesses and 86pc expected to make a profit.

"Essentially what's been driving these two metrics has been the historically high farmgate milk prices, that have been offered to farmers over the season," Ms Redfern said.

"There is an established trend between that business sentiment and the profitability side of things - as profitability, or profitability prospects, rise, you start to see positivity around farm business, as well."

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But that was not translating into industry, or milk production growth, with more businesses favouring stability over expansion.

Farmer confidence in the industry was stable, with 67pc of respondents feeling positive overall, compared with a third during the lows of 2019.

"Over the last year, the number of farm businesses in an expansion phase has dipped slightly from 26pc, to 22pc, while those in a 'steady and happy' position risen consistently, from 23pc in 2019 to 42pc," the report found.

Ms Redfern said operating conditions had been quite challenging, over the last season.

The floods were the catalyst for derailing the steady milk production trajectory originally forecast for the season

She said in addition to farm exits, input costs - which had been high - labour constraints, high land prices and beef prices had encouraged business diversification.

Price uncertainty was still a factor.

"There has been some movement on input prices, recently," Ms Redfern said.

"Fertiliser prices have started to ease a little bit, but labour constraints are still very relevant and weighing on milk production."

In the last 12 months, the survey found 60pc of farm businesses had felt the impact of difficulties finding employees, with 25pc saying they faced "severe" impacts.