Victorian dairy farmers say break-even point is at a record high

Strong farmgate prices are being consumed by galloping input costs, with farmers saying fodder is the prime profit eroder.

Dairy farmers across southeastern Australia say input costs are at record levels in dollar terms, with fodder scarcity pushing expenses higher than $9 per kilo milk solids.

With the new financial year kicking off on July 1, electricity, petrol, fertiliser – particularly urea – as well as labour workforce costs have all risen with or above inflation.

Cereal hay is now higher than $450 a tonne, depending on quality, while lucerne sells for north of $500 a tonne – with freight costs often lumped on top.

Northern Victorian farmer John Keely. PICTURE: ZOE PHILLIPS

Northern Victoria farmer John Keely, who operates in the Cohuna region, said every cent of the farmgate price movement in June was needed.

“There’s been a lot of talk about better prices, but when it comes to dairy farming, it’s all about the profit margin and costs are eating into that margin,” Mr Keely said.

“The price is better than last year but 2024 was a bloody shocker.

“We didn’t have to buy the feed in last year but we used a record amount of water, and there was still country I didn’t irrigate.

“Some companies were rushing around because they hadn’t locked down farmers and now some are paying $10 (per kilo milk solids). That’s what happens when they started so low.”

Gippsland farmer Benjamin Vagg, based at Leongatha South, said fodder remained the key cost crunch as primary producers statewide battled to secure feed.

While the farmgate average rose over June to sit closer to $9.50 per kilo milk solids, Mr Vagg said surging input costs were more than keeping up.

“The difference between south Gippsland’s autumn last year and western Victoria was the timing of the rain,” he said.

“Last year, we had grass through May and June – the timing of the rainfall was magic compared to this season.

“South Gippsland got lucky (in 2024). We’ve got mud now but not enough pasture cover, hence the fodder hunt by every farmer.

“I think most farmers will be able to at least break-even but that’s if we get a spring – we have to get a decent spring.”

Ann Gardiner. Picture: Zoe Phillips

Northern Victorian farmer Ann Gardiner, based at Bamawm, said the rise in urea prices following the Iran-Israel conflict had not abated.

“You might have consumers in the supermarket with a cost-price squeeze but dairy farmers are in the same boat,” Mrs Gardiner said.

“Interest rates are still high, fertiliser is rising and look at urea in recent weeks with the Middle East situation.

“Hay is beyond an economic situation — it’s as basic as keeping your cattle alive. We’ve been fortunate in not having to go into the fodder market at the moment, but it’s tough for many dairy farmers seeking feed.”

United Dairyfarmers of Victoria president Bernie Free, who farms in southwest Victoria, said input cost crunch would quickly overtake the farmgate price.

“The industry needs to do better than break-even on price because there’s a lot of catch-up to be made, particularly following the dismal pricing of last season,” he said.

“Step ups will be needed on the current farmgate prices in the coming months, that’s just a given for the industry’s survival.”