A report on the impact of drought on the rural sector released by the Australian Bureau of Agricultural and Resource Economics and Sciences last week shows 34 per cent of dairy farms are forecast to have negative farm cash income.
The report forecasts average dairy farm cash income at $84,000 but once the change in trading stocks, depreciation and the imputed value of family labour is taken into account, farm business profit is expected to turn to a $64,000 loss.
“Lower milk production, higher fodder costs and reduced herd sizes mean that average farm business profit for this industry is forecast to fall by over $150,000 per farm in 2018-19 compared with the previous year,” the government forecaster said in its report.
It is the worst performance of the four main rural sectors — grains, beef, sheep and dairy — with only the sheep industry expected to have positive farm profits.
The grim prospects for dairy farmers is further confirmed by Rabobank in its Dairy Quarterly report also released last week.
The bank said dairy farmer margins would remain under significant pressure well into next year, with no relief in sight from high input costs.
“The operating environment for farmers will continue to be taxing, with input costs expected to remain elevated,” according to the Rabobank report.
“This means there is little relief on the near-term horizon for farmer margins.”
Rabobank said farmers had tried to mitigate rising feed bills by cutting herd numbers.
“In the three months between July and September, dairy cow cull rates jumped 15 per cent versus the same period last year,” the bank said.
“Dairy farmers may look to make further herd reductions during the summer months should feed shortages worsen.”
Rabobank has followed
ABARES in forecasting a 4 per cent decline in milk production for 2018-19.
It said the biggest decline was in the Murray Dairy irrigation district, where milk production fell 10 per cent in the first quarter of 2018-19.
Australian Dairy Farmers president Terry Richardson said he was not surprised a third of dairy farmers would have negative incomes this season, with high fodder and irrigation water costs and adverse climatic conditions.
Mr Richardson said he hoped the impending dairy plan would find ways to counter volatility in the industry.