Editorial: Challenging days down at the dairy

EDITORIAL: DAIRY farms have been the flagship for the Tasmanian agricultural sector in the past five years, with milk production expanding rapidly.

DAIRY farms have been the flagship for the Tasmanian agricultural sector in the past five years, with milk production expanding rapidly.

Demand for milk and milk products has gone through the roof, largely due to the insatiable appetite for milk powder of the growing Chinese middle-class.

Prices have remained high amid this increase in production, resulting in buoyant confidence in the sector that has in turn encouraged further investment. As we all know, confidence is a peculiar phenomenon because it feeds off itself. Success breeds success.

The dramatic and sustained expansion and the perception of a “blue sky” future in dairy has resulted in land that was sown with tree plantations — which had once been prime dairy land before forestry managed investment schemes artificially inflated prices and lured many of the state’s dairy farmers into selling their farms — being returned to pasture and cows. The circle complete.

However, in the first hiccup in the sector in some years, Fonterra, Tasmania’s biggest dairy processor, yesterday announced it was cutting its supplier milk price. This less-than-welcome news came only a week after Murray Goulburn slashed its farmgate price.

MORE: CHEAP MILK SHAKES FARMS

Fonterra Australia has revised its farmgate price for the full 2015-2016 season from $5.60/kg of milk solids to $5/kg. This will have a significant impact on Tasmanian farmers. Fonterra says the price change reflects the reality of a supply and demand imbalance affecting global dairy commodity prices, compounded by the strength of the Australian dollar.

Tasmanian farmers will take this as a strong message that while the future for dairy looks positive, the sector is inextricably bound to global markets and there is a need to brace farm operations for the inevitable fluctuations.

It is a mark of the complexity of the farming game that this challenging news should come after the first serious rain in the state for many months. A dry spell has hung ominously over the island since summer and reduced grass to little more kindling in some districts. The rain in the past week has lifted spirits appreciably. The news also came amid the fanfare at Agfest in Carrick in northern Tasmania, where so many farmers were sharing a laugh.

100 years today

AS Hydro Tasmania chief executive Steve Davy points out, it is indeed notable that today’s 100th anniversary of Waddamana Power Station in the Central Highlands should occur at a time the island faces an unprecedented energy security challenge.

Waddamana in 1916 marked the start of Tasmania’s journey into state-run hydro-electricity generation. It represented a level of energy security not seen before on the island. However, with Basslink interstate power cable out of action and repairs on hold due to bad weather, today there is a palpable sense of anxiety about our future power supply.