Dairy farm exodus likely over next two years

A dairy industry leader has forecast there will be attrition among Australian dairy farmers over the next two years with prices expected to stay at current levels over that period.

Jeremy Bayard, the managing director of ACE Farming Company told an agri investor forum in Melbourne on June 8 that Australian dairy farms needed to get bigger to become more efficient like America and even New Zealand.

ACE Farming is the biggest dairy farming business in Australia. It owns, leases or manages more than 23 farms running a herd at its peak of 13,000 head.

“We’re still having this mighty arm wrestle fighting smaller, inefficient and probably unprofitable farms,” he said.

Speaking in a panel session with other dairy industry leaders, Mr Bayard said some processors that had sustained their milk prices were doing well.

“I’m not sure the farmers who were marching in the streets of Melbourne were helping the industry in any way.

“In fact I suspect they were doing it a great disservice because that dissuades investors from coming into the industry. And when they see people saying they want to impose a 50 cent levy to support farmers that’s not a good look and it’s not one the industry needs.”

But Norco Co-operative chairman Greg McNamara believed it was a buyer’s market if you were an investor.

For Norco’s 230 farm suppliers he was confident however of holding the price at the co-operative’s current level.

Mr McNamara also said he thought there was an incredible opportunity for smaller farms to grow and prosper although he agreed there was a sector of the industry that would become corporatised and operate at a higher level.

Mr Bayard believed family farms would morph into much larger structures. There was already evidence of that in Gippsland where up to five families were milking a combined herd of 2000 cows.

“If the average size of a dairy farm in Australia is 260 cows there is a hell of a lot of farms milking  less than that and they are the ones I see are really going to struggle. They’re just not economically feasible. “

He said the key for farmers was to keep costs down.

Dairy Australia managing director Ian Halliday said long term the future for the industry was strong despite prices being at their lowest in 10 years. “Yes it’s going to be a tough 12-18 months ahead. But he said it was not just Australian dairy farmers that were going to have a tough time. So too would NZ farmers.

One area Dairy Australia is helping farmers is to improve farm business management skills and dealing with price volatility.

A recent survey had shown that less than 50 per cent of 6200 farmers nationally did a budget and less than 20pc of those used it. 

To deal with that a software tool DairyBase was launched last year to help farmers document all their financial data and “make informed decisions”. Since then there had been 1000 registrations and in the last four to five weeks Dairy Australia had been inundated with further ones.

“Accountants can now sit down with farmers and drill into what are core profit drivers and what they need to do to focus on costs of production,” he said.

Mr Bayard said the institutional investors always bemoaned the lack of benchmarking in the dairy industry.

But what DairyBase would do was provide a comprehensive nationwide database and benchmark that investors could use to see how the investment they were looking at compares with the industry standard.

By JOHN CARSON

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