The state of Australia’s dairy industry

An average farm with 200 cattle will lose more than $146,000 if no step-ups are announced this season, as farmers say they are “working for nothing”.

BEING stuck between a rock and a hard place is all part of a day’s work Ben Bennett.

The farm owned by the president of Australian Dairy Farmers is located at Pomborneit, about halfway between Camperdown and Colac in southwest Victoria.

His patch of dairy country is known as the Stony Rises — rocky ground formed on geologically recent lava flows between Mount Porndon and southwestern shoreline of Lake Corangamite.

Famous sons of the Stony Rises include artist John Gardner, known for his earthy landscapes, and Victorian Governor Richard McGarvie, known for his earthy approach to vice-regal duties.

But the usually fertile earth of Bennett’s farm is uncharacteristically barren this winter.

“It’s a green drought from Geelong to the South Australian border,” Bennett says.

“We definitely need mud to make money. Our pasture-based system is a lucerne-based system for this drier weather but even in dry weather, we need at least a little bit of rain.”

Weather isn’t the only complication facing dairy farmers in 2024.

After a string of profitable seasons, major milk factories rained on the parade of farmers — even if the real stuff wasn’t falling from the skies.

New-season opening milk prices announced by most dairy processors at the start of June were largely in the $7.80 to $8.30 per kilogram of milk solids range for Victoria, down by more than $1.50 per kilogram from last season.

Australian Dairy Farmers director Ben Bennett.

Outside the largest dairy state, most processors are pricing lower this season compared to last, with a few notable exceptions.

One of the pricing outliers was Norco, based in northern NSW and southern Queensland, opening at $12.35 per kilogram of milk solids — the same figure the co-operative opened with for the 2023-24 season.

Some farmers locked in long-range contracts in the season or two prior to the current financial year, which set their pricing above $10 per kilogram and provided some immunity from the costing crash.

JARGON such as “dollars per kilo milk solids” is understood by dairy farmers as intuitively as the parameters of an acre.

So putting it in hard cash terms really spells out the financial frustrations that primary producers are facing.

Numbers crunched by Bennett’s ADF organisation show an average farm with 200 cattle will lose an estimated $146,803 in the 2024-25 season if no step-ups are forthcoming, based on the current cut of $1.50 per kilogram of milk solids.

A farmer with 300 cattle will lose an estimated $220,204 while a milk supplier with a 400-head herd would lose $293,606 and a 500-head operation would lose $367,007 — based on the $1.50 per kilogram cut.

“For many farmers, they’ll be earning about the cost of production. So after all the bills are paid, at the end of the financial year, they’re working for nothing — or at least a very small profit,” Bennett points out.

“We’re talking a big cut to the dairy farmer’s bottom line. The processors are thinking about the short-term financial gains, and it’ll be great for their shareholders in the short term.

“In the medium term, they’ll see more and more farmers leaving dairy and that will end up costing their businesses. They saw the consequences of the clawback eight years ago and mistakes are being repeated.

Janine Waller, ADPF executive officer.

THE clawback Bennett refers to is the 2016 decision by Fonterra and then rival Murray Goulburn to dramatically cut prices in the middle of the dairy season.

Not only was the price cut untelegraphed — it was also retrospective, hence the “clawback” phrase.

Much like the 1991 floor price erasure for wool, the 2016 clawback is now etched in the collective memory of Australian dairy.

Murray Goulburn ceased to exist within two years of the 2016 decision, swallowed up by Canadian behemoth Saputo while Fonterra is also set to radically alter the way it operates in Australia and possibly exit the local market.

With relations still raw between processors and farmers, the main conduit to present the view of the dairy factories has been the Australian Dairy Products Federation.

ADPF chief executive Janine Waller says processors had to adjust their operations to match supply, “ensuring economic viability for the future.”

“This strategy aims to protects jobs and the dairy products we love, safeguarding the industry for years to come,” Waller said.

“We want certainty for both dairy farmers and processors to confidently plan and invest in the industry.”

Jayke Fisher on his property. Picture: Yuri Kouzmin

In a string of recent statements, Waller has raised the industry-wide concern over the influx of imported dairy onto Australian shelves.

“The last couple of year’s record-high milk prices, led to an influx of international dairy products, resulting in unprecedented imports and high consumption of cheaper overseas alternatives,” she says.

“The data speaks for itself. In FY22-23, imports surged by 17 per cent (including a 29 per cent increase from New Zealand and 16 per cent from the US), leading to the highest ever consumption of overseas dairy products in Australia – nearing 30 per cent, or 344,000 tonnes.

“We want to ensure Aussie families can continue to enjoy affordable, locally made and branded milk, cheese, yoghurt, butter and ice cream in their homes.”

YOUNG farmers are frustrated with the processors — but they also say the supermarkets, with their low pricing, and the Big Four banks, with their lack of pro-farmer financial offerings, share some of the blame for Australian dairy’s existential crisis.

Jayke and Bec Fisher milk 240 cattle at Lancaster, 30 kilometres west of Shepparton, and entered the dairy sector a decade ago.

They say while Canberra and corporate leaders say they want more young people entering agriculture, financial conditions are hardly encouraging for fledgling farmers.

“Unless you’re the son or daughter of a farmer, and good luck to you if you are, but if you’re entering from the ground up,” Fisher says.

“You’ve got high interest rates to work with. New entrants are having to pay off loans for stock as well.”

Gippsland farmer Aaron Thomas says supermarkets while processors have been copping criticism, supermarkets also needed raise prices for milk to reflect reality.

“The supermarkets have got a big role to play in creating a sustainable dairy industry,” the Wron Wron farmer says.

“The dollar a litre days are over but it’s still really cheap for a litre or two litres of the supermarket brand milk. It shouldn’t be $1.60. Even $2 a litre is pretty cheap.

“They say it doesn’t hit the farmgate but when prices have gone up at the consumer level before, they’ve risen at the farmgate too.”

Aaron Thomas on his property. Picture: Yuri Kouzmin