Dairy farmers enjoy strong season, but future remains uncertain

Despite enjoying the strongest prices in a decade, dairy leaders say the industry needs more stability to remain viable.

One stellar season, even two, do not make up for a decade of tumult, say the nation’s dairy lobby leaders. Picture: Chloe Smith

Going out on a high.

That’s the sentiment you hear time and again from the nation’s dairy farmers when you ask them why they’re leaving the sector.

It seems counterintuitive. Dairy prices are the strongest in a decade. Dairy regions are lush after steady autumn and winter rain. Input costs are relatively stable. Even the dastardly processor has been brought to heel, somewhat, by the mandatory dairy code of conduct, introduced by the Federal Government last year.

So why the exodus?

One stellar season, even two, do not make up for a decade of tumult, say the nation’s dairy lobby leaders.

United Dairyfarmers of Victoria president Paul Mumford has led the charge over the past 18 months for farmers to get a fairer share of dairy profits.

“We’re finally seeing prices that reflect not only the international market but the time and resources that go into producing milk,” Mumford says.

United Dairyfarmers of Victoria president Paul Mumford. Picture: Supplied

The 2016 clawback at the farm gate by Murray Goulburn and Fonterra has left a deep scar on the Victorian sector. One in four Victorian dairy farmers have permanently left the milking shed in the past five years, with farmer numbers plummeting from 4141 in 2016, to 3069 today.

“The prices we saw in 2020-21 were good. What we’re seeing in 2021-22 is even better,” Mumford says. “But following on from the 2016 clawback, there were several ordinary seasons. Some farmers left dairy then, some are now deciding to go out on a high. Plenty more will keep at it now that there’s stability.”

International prices are one of the key factors in boosting the southeast Australian farmgate price.

Skim milk powder prices have rocketed from around $US2500 a tonne at the start of the pandemic in March last year to trading around $US3400. Whole milk powder prices have gone from $US3000 to $US4200 a tonne and butter from $US4100 to $US5000 a tonne.

But Victoria and Tasmania are luckier than other states – Western Australia and Queensland farmers pump out milk almost exclusively for the domestic market. Lack of an export alternative has seen a similar exodus from the land out west.

WA Agriculture Minister Alannah MacTiernan floated the idea of a “minimum wholesale price from retailers” during a speech to dairy farmers in August.

WAFarmers dairy council president Ian Noakes says while 2021-22 is shaping up to be a better season than most seen throughout the 2010s, prices needed to be higher. “When it comes to a farmgate price, the average WA dairy farmer is getting in the low 50s at the moment – 52, 53, 54, sometimes 55 cents a litre,” he says.

“That’s a particular issue here in WA. The shopper in Perth is paying $1.44 a litre on average at the checkout while in the east (states) it’s $1.51 a litre on average. That seven cents makes a big difference, particularly when you’re reliant on domestic sales for your survival.”

Queensland bore the brunt of the deregulation of the Australian dairy sector in the early 2000s. The Sunshine State still has its challenges but Queensland Dairyfarmers Organisation president Brian Tessmann says the sector has turned a corner.

“Toowoomba really has been the dividing line when it comes to the weather. (Dairy farms) south of Toowoomba down to the NSW border have had a good season,” Tessmann says. “North of Toowoomba less so. Things have been up and down in the Atherton Tablelands too. But overall, you’d say this was one of the better seasons we’ve had in a while.”

The entry of Bega as a force north of the Tweed has also buoyed prices.

A common element across Australia pulling farmers out of dairy hovers in plain sight over the boundary fence.

Beef prices have been strong and heading into the 2021-22 financial year, they’re looking even better to the beleaguered dairy farmer.

“There’s no doubt beef looks attractive. Even with OK prices in dairy, beef has outpaced that. So that is certainly something that some dairy farmers look at, particularly if they’re thinking of early retirement,” Tessmann says.