Dairy Australia is anticipating national milk production to drop between five and 10 per cent due to the low farm gate milk price and seasonal conditions.
Dairy Australia chairman Geoff Akers addressed the business and rural club, GV BRaIN, in Shepparton in August and outlined the current challenges facing the industry.
Major processors have announced farm gate prices of between $4.31 and $5/kg milk solids while Mr Akers pointed out the estimated average cost of production for a northern Victorian dairy farmer was about $5.53/kg.
He noted the last time prices were at this level was about 2008.
Murray Goulburn had given an indication of a finishing price at about $4.80/kg.
“Farmers are obviously under pressure at the moment,” Mr Akers said.
He listed the drivers of the poor prices as the exchange rate, supply and demand, world dairy prices and the Australian export product mix.
On the domestic front, the prices were influenced by product mix, factory throughput, prices paid by the largest buyers and co-operative dividend policies.
Mr Akers was not expecting price recovery until well into 2017, and the strength of the recovery would be influenced by the weather, inventory levels and the demand in Asia and other developing countries.
Looking at milk production figures, Mr Akers said Victoria was down nine per cent compared to last year, and northern Victoria was suffering the biggest decline in the state, with 14 per cent down.
In question time, businessman Peter Bicknell asked how Goulburn Valley people could best support dairy farmers, and Mr Akers replied: “Buy Australian branded dairy products”.
Responding to a question about the numbers of cattle being off-loaded at saleyards, Mr Akers said he hoped farmers would be culling older cattle and not selling off young or prime producers.
“I hope most people are making informed decisions,” he said.
More than half of the industry had been affected by price reductions this year.
In terms of cost of production for an average Victorian dairy farm, Mr Akers said the average was about $5.36 kg/milk solids and northern Victoria last year was slightly higher at $5.53/kg.
He compared this to the opening milk prices ranging from $4.31/kg to about $5/kg, for most farmers.
Funded by farmer levies, Mr Akers said Dairy Australia had three priority areas: Profitable dairy farms, developing capable farm people, and being recognised as a trusted industry.
“It’s about our ability to farm, promoting and protecting our industry and our social licence to operate,”
Mr Akers said there was a declining number of farms, a trend which had developed since the 1960s, as farms grew larger.
Australian dairy industry
Number of farms: 6128
Average farm size: 284 cows
Average production: 6000 litres/cow
Total Aust production: 9.6 billion litres.
Australia’s share of global dairy production: 2 per cent
World ranking in export of dairy: fourth
Major markets: Japan, China, South-East Asia, Middle East.