More positive times for dairy industry

The dairy industry has had many tough times over recent years. There was the drought that kept going, followed by devastating floods, ongoing wet and muddy conditions, and a massive increase in the cost of inputs.

However, in recent months there have been some significant positives. Although there has been some rain, weather conditions have generally been better in most regions over recent months. Hopefully this continues and we have a normal wet season coming up.

The cost of inputs has stopped rising rapidly and have fallen for some inputs. The price of some inputs including urea increased again after falling considerably. Hopefully, we can see a steady fall in key inputs including fertiliser, fuel, and grain over the coming months.

The milk price increased substantially in July and most farmers would likely receive between 85c and $1 per litre this year. This is a historically very high milk price and with a softening in input costs would lead to decent profits for most farmers.

So, what has been the impact of the changes on dairy farmers? Some farmers have still ceased dairying in recent months but the mass exodus that we saw, especially during the drought, has ended.

There are an increasing number of farmers spending money on their farms given the more positive times currently and expected in the future. Some farmers are buying cows in an attempt to rebuild herds and increase milk production to take advantage of higher prices. There are an increasing number of farmers investing in capital on their farms both machinery and sheds.

Many farmers are investigating whether to make large changes to farm infrastructure to make their farms more resilient to future weather events (both flooding and droughts). This would be a very large capital investment for most farmers so many are wanting more certainty over future milk pricing before making such huge investments.

There are more positive signs for the industry. Most farmers want clear commitments from processors to increase milk prices to at least $1/L in the next year and maintain the 15C/L for new milk for at 3 years. These clear signals will be required for farmers to pull the trigger on substantial investments leading to large increases in production. I expect that the potential new entrants to the dairy industry are wanting the same before investing.

Eric Danzi, Co-CEO eastAUSmilk