Dairy Australia’s year in review highlights power, labour costs

Dairy farmers are battling costly expenses across the nation, but some states have been more profitable than others. See the numbers.

Victorian dairy profit margins have doubled in the wake of the 2016 clawback — but the cost of running a farm is galloping as well.

New figures from Dairy Australia covering the post-2016 era reveal a revival in fortunes for the beleaguered sector, with surpluses in most states hovering close to $4.00 per kg milk solids.

Victorian and South Australian farmers were the biggest winners last financial year, with an average surplus figure of $3.94 per kg milk solids.

NSW stood at $3.84, Queensland at $3.75 and WA at the back of the pack with a $3.49 per kg milk solids average in the 2022-23 season.

Victorian and SA farmers enjoyed the biggest surplus jumps between the 2016-17 and 2022-23 financial years; in the wake of clawback, they were barely making $1.50 per kg milk solids in profit.

Dairy Australia industry analyst Isobel Dando said record-high farmgate prices played their part in the pricing purple patch for the sector.

But a combination of surging power prices, labour costs and other input expenses eroded the gains somewhat.

“Farmgate prices were at record highs last season. What our figures have shown is that expenses were also very high last financial year,” Ms Dando said.

Released recently, the Australian Dairy Industry in Focus report goes someway to explaining why farmers continued to leave the sector despite strong prices, with a correlation between shrinking margins in 2019-20 and an exodus of primary producers.

Dairy profits have been somewhat eroded by power price pressures. Picture: iStock

United Dairyfarmers of Victoria president Bernie Free said council rates were also rising and that the state government had a role to reduce municipal pressure on rural ratepayers.

“Everyone’s power bill is going up, many businesses have the issues with labour costs,” Mr Free said.
“Rates are an area where farmers in particular are also feeling pressure, along with those other price rises.

“The UDV wants the state government to do more to reduce the rates burden, it’s not the fault of councils alone.”

South Australian Dairyfarmers Association president Robert Brokenshire said power prices would continue to erode dairy profit margins.

“Power bill prices aren’t going to go down anytime soon,” he said. “Running a dairy takes a lot of power, it’s not like a household, so that needs to be acknowledged.”

The annual review confirmed Australia’s milk pool fell to a 30-year low last financial year, clocking in at 8.129 billion litres.