Cream rising to the top: Victorian dairy delivers

The annual Dairy Farm Monitor, which tracks 80 businesses throughout the state, found increased profitability was due to a 33 per cent jump in the milk price, to $9.77 a kilogram Milk Solids.

That was the highest figure in 17 years, helping offset rising feed costs and overheads.

"It is pleasing to see Victorian dairy farmers come out on top following a year of higher business inputs, wet conditions and flooding,"' Agriculture Victoria Sector Development and Services Executive Director Dougal Purcell said.

Throughout the state, gross farm income increased by 21 per cent, to $10.85/kg MS, compared to the previous financial year.

The average Victorian dairy farmer earned $617,000 in 2022-23, before interest and taxes, well above 2021-23, which came in at $384,000 per farm.

That was the second highest income, behind 2007-08, in the 17-year history of DFM.

The release of the annual report comes as processors say they are facing global headwinds and Saputo Dairy Australia announces factory closures.

But total costs rose $0.83/kg MS to $7.98/kg MS, the highest in DFM history.

The main driver for higher costs was a $0.68/kg MS increase in feed costs.

Profits per farm averaged $617,000 across the state and were well above the long-term DFM average of $300,000.

Average profitability of $2.87/kg MS was the second highest in 17 years of DFM.

Larpent dairy farmer Lachie Sutherland said costs were a drag on profitability.

"It's been a good season, up until the present, milk prices are good, but costs are still intrusive," Mr Sutherland said.

Power, grain and labour costs were the biggest challenge.

'Fertiliser is not as expensive, there is some relief there - the record milk price just got eaten up by fertiliser prices and a wet season, where we couldn't produce milk," he said.

"My milk production, last year, was 9 percent lower."

And Cohuna's John Keely said the better milk price translated into higher profits.

"Our input costs have gone up, but we have been able to manage them relatively well," Mr Keely said.

Farmers were also mindful of drier conditions ahead due to the predicted return of the El Nino, he said.

"We have been mindful of what water we have got, we haven't irrigated some of our annual crops, we have done it for silage earlier and we have a record tonnage of dry matter."

"We are just monitoring to see how things go and planning accordingly."

Profitable times meant farmers were able to carry out postponed upgrades and capital improvements, he said.

He said he'd upgraded laneways to gravel, to help deal with wet weather, and was hoping to lay some more pipelines.

"You are actually able to do some capital improvement within the business, apart from maintenance, and do other things that make farming a little bit easier - all those things you have put on hold when things are so tight.

'You just can't afford to them - so it's been good to be able to do that sort of stuff."

The monitor is a partnership with Dairy Australia, collecting and analysing financial and production data from dryland and irrigated dairy farms in south-western Victoria, Gippsland and northern Victoria.

Dairy Australia, Research and Innovation general manager Greg Jarman said farmers made multiple operational and tactical decisions on a daily, weekly and seasonal basis.

'Some of these decisions can have a lasting impact on the profitability and sustainability of their farm,' Mr Jarman said.

'The Dairy Farm Monitor Project is a valuable source of independent physical and financial data around a wide range of on-farm practices, equipping farmers with essential insights to inform their decision making.

"This information also ensures that on-farm consultants and industry stakeholders can use reliable, independent and useful information and resources to provide good advice to farmers.'

Project participants represented a distribution of farm size, feeding systems and herd sizes.

Mr Jarman said farmers used the reports for business decision-making, tracking the performance of their business over time, making large-scale changes and assisting with financial management.

Valued at $2.5 billion, Victorian dairy leads the nation's exports.

The gross value of milk produced in Victoria is worth $2.86 billion and the sector supports almost 13,000 jobs, almost half of which are in regional Victoria.

There were approximately 2,773 dairy farm businesses in Victoria that produced 5.14 billion litres or 63% of Australia's national milk production in 2022-23.

The 2022-23 Dairy Farm Monitor report is available on the Agriculture Victoria website.