Positive outlook for the NSW dairy industry after challenging years

Profitability in the NSW dairy industry has rebounded in the past financial year following years of drought according to the Dairy Farm Monitor Project run by NSW Department of Primary Industries (DPI).

DPI Dairy Development Officer Sheena Carter met with dairy farmers on the South Coast recently to discuss the ongoing project, which is now in its ninth year and reported performance of 35 farms across the state.

"Despite a tough first half of the year for our NSW dairy farmers who have felt the impacts of the ongoing drought, water shortages and devastating bushfires, the project has shown a pleasing improvement in farm profitability,” Ms Carter said.

“While profits were mixed across the state, average earnings before interest and tax almost triple compared with the 2018-19 financial year, for the 35 farms monitored.”

This translated into a Return on Total Assets managed of 2.7%, up from 0.7% in 2018-19, boosting farm incomes, however Ms Carter cautioned that results within the project and across the industry were still very mixed.

“Average net farm income after accounting for interest and lease costs increased to $162,689, whereas the average result in 2018-19 was a loss of more than $30,000,” Ms Carter said.

“However, not every farm in the project was able to achieve an operating profit, which reflects the experience in the wider industry.”

“Challenges of persistent widespread drought and reduced irrigation meant that in most areas it was difficult to grow homegrown feed and so we saw an increase in the amount and cost of purchased feed, the highest in the nine years of the project.

“Fortunately, the NSW Government’s drought support payments helped cushion the impact of high fodder prices for many producers, and strong processor competition for milk saw the average milk price increase by 14.7 per cent to $8.88 per kg of milk solids.

“That meant most businesses were able to achieve a good operating profit despite  having to rely on high purchased feed prices.”

Widespread rainfall events in autumn and early winter across most dairying regions, particularly in the north of the state, also gave farmers the confidence to sow and renovate pastures and the opportunity to make silage in some areas.

“The industry is positive about the future, with 94 per cent of farmers in the project indicating they expect their profitability to improve or remain stable, and all farmers anticipated milk production will remain stable or improve,” Ms Carter said.

“The major challenge dairy farmers have identified over the next five years is seasonal conditions which is not surprising given the challenging period the agricultural sector has been through recently.”

The NSW Dairy Farm Monitor project reports on farm-level data to give an indication to industry and farmers on the financial and physical performance trends over time in NSW.