Less than half of dairy farmers expect to make a profit this year and milk supply continues to fall, Dairy Australia managing director Ian Halliday told a Senate Estimates hearing in Canberra last week.
One thousand farmers were questioned as part of the group’s annual survey, with just 45 per cent expecting to make a profit this financial year, down from 62 per cent in 2015-16.
Mr Halliday said the figures were ‘‘disturbing’’ but said they went beyond just milk prices.
‘‘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.’’
When questioned about the impact the announced closures of Murray Goulburn factories in Rochester, Kiewa and Edith Creek (Tasmania) would have on the industry, Mr Halliday said he was ‘‘empathetic’’ to the communities impacted by the changes but maintained it was a commercial decision from Murray Goulburn.
‘‘That said, there is also ongoing investment still taking place in the industry,’’ he said.
‘‘In northern Victoria, Fonterra are starting up a new cheese factory in Stanhope in the next couple of months ... so there is still ongoing investment within the processing sector, so there is still a lot of competition for milk.’’
Despite global demand growing by about two per cent each year, Mr Halliday said finding a way to get profitable milk volume growth to support that demand was a challenge.
Current projections point to milk volume falling seven to eight per cent on last year’s levels, off the back of a two per cent reduction in volume from 2015 volumes.
‘‘That is a lot of milk gone,’’ Mr Halliday said.
‘‘We bottomed out at the end of 2009 — well, we thought we had bottomed out — at about 9billion litres.
‘‘This year, we will probably be down to about 8.8 (billion litres). So we are down about nine to 10 per cent over the past couple of years.’’
Mr Halliday told the committee that seasonal conditions, a lack of confidence in the industry from farmers, milk price, culling of cows and market conditions had taken their toll.
‘‘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.’’
■More information about the state of the dairy industry will be released in Dairy Australia’s Situation Outlook in coming weeks.