Girgarre farmer Pat Nicholson on the dairy farmgate price cut

Girgarre farmer Pat Nicholson says farmgate prices are undercutting confidence in the future of dairy.

According to Pat Nicholson, when they slice the farmgate price, you need to curb the herd.

The northern Victorian dairy farmer speaks from experience having stripped back in milking herd numbers in the wake of the 2016 clawback.

Now the Girgarre-based Mr Nicholson is contemplating slimming his 450-strong herd in light of low farmgate prices, which represents a $300,000 reduction in farm income.

He said while 2024 conditions weren’t as bad as the seasons in the shadow of clawback, it would force many dairy farmers to contemplate switching to other sectors or early retirement.

“Five years ago, we sold all our milking herd — water prices were high and milk farmgate prices were low. It wasn’t financially sustainable,” Mr Nicholson said.

“We kept our heifers in 2019, we rebuilt our herd from there. We weren’t prepared to borrow money just to get through a season on the promise of step-ups that may never come.

“What the processors don’t realise is how these low prices are going to have a long-term effect on the industry. Farmers won’t invest, more will leave dairy.”

Most processors in southeastern Australia are paying $7.90 to $8.30 per kilo milk solids at the farmgate this season — a 10 to 20 per cent drop on last financial year.

Dairy Farmers Victoria estimates the cost of production to be roughly in the same ballpark, meaning many primary producers are working for little to no profit this season.

“Even if it were closer to $8.50 per kilo, that would provide a little bit more return,” Mr Nicholson said.

“It feels like an overcorrection from the processors. They went too hard in trying to attract supply last season at up to $10 a kilo and now they’re playing at the opposite end.

“It’s not sustainable and will do long-term damage to the Australian milk pool, the consumer buying the milk and the processors themselves ultimately.”

Australian Dairy Products Federation chief executive Janine Waller said the new

season’s southern region farmgate milk prices were more closely aligned with global

market conditions.

“The last couple of years of record-high milk prices, led to an influx of international dairy

products, resulting in unprecedented imports and high consumption of cheaper overseas

alternatives,” Ms Waller said.