Victorian dairy industry “a tale of two halves”

By Rodney Woods

Victorian rural sentiment has staged a strong rally, with the state’s farmers now among the most confident in the nation, the latest Rabobank Rural Confidence Survey has found.

Dairy farmers were behind much of the upswing, with 45 per cent expecting conditions to improve on the back of strong milk price signals — with record high opening prices — and improving seasonal conditions in the southern dairy regions.

But it is a tale of two halves in Victoria’s dairy sector, as milk production continues to tumble in the north of the state as farmers contend with high water and fodder costs.

“Most dairy regions in southern Victoria have benefited from good winter rainfall, but it is the strong price environment that has driven the rebound in confidence,” Rabobank's southern Victoria and Tasmania regional manager Hamish McAlpin said.

“However in the north, high water and fodder costs have taken the gloss off the high milk price — with little respite foreseen in coming months."

With lack of milk and latent capacity in the processing sector driving record high opening milk prices, Mr McAlpin said this was starting to feed into business' bottom lines, with 65 per cent of dairy farmers expecting a higher gross farm income in 2019-20 than the previous financial year.

Meanwhile, the state’s grain growers retained their upbeat outlook on the year ahead — and are more positive than their counterparts across the country — as Victoria’s crops shape up to be the best in the nation.

Mr McAlpin said the crops were faring well in the Goulburn Valley around Echuca, Shepparton and Benalla, and in southern Victoria around Ballarat and Hamilton.

Across the state, 37 per cent of farmers have a positive outlook on the agricultural economy in the coming 12 months, up from 31 per cent with that view in the previous quarter.

Of those with an optimistic outlook, 65 per cent cited seasonal conditions as a key reason for their view, while commodity prices were nominated by 53 per cent.

Just 16 per cent of Victorian farmers surveyed were anticipating a deterioration in the agricultural economy (down from 22 per cent previously), while 39 per cent expected no change.

Mr McAlpin said the outlook for grain prices also remained positive, with growers “acutely aware of the dry conditions over the border and the impact on local supply and demand”.

In the livestock sectors, Mr McAlpin said, confidence had improved among the state’s beef producers, with 41 per cent expecting an improvement in conditions (up from 26 per cent).

Meanwhile sentiment in the sheep sector had waned, with 16 per cent expecting an improvement (down from 24 per cent), although 57 per cent were still expecting a continuation of current conditions.

“While graziers benefited from the late autumn break, many continue to feed their stock, as there are patches around the state that remain very dry,” he said.