The profitability of Australian dairy farming fell after two consecutive years of record performance, a new report by the Australian Bureau of Agricultural and Resource Economics (ABARES) revealed.
“The profitability of dairy farming in Australia fell in 2023–24, albeit from record high levels in the previous two years. Drier conditions across many regions and lower farmgate milk prices in some states put downward pressure on farm incomes in 2023–24,” said the report.
Profitability to decline further
Looking ahead, ABARES forecasted a challenging year ahead for dairy producers.
“The profitability of dairy farming is expected to decline further in 2024–25 due to lower farmgate prices for milk and drier seasonal conditions in parts of south-east Australia,” it said.
Average milk production per farm is forecast to be 2% lower at the national level.
Average farm cash income is forecast to decline 20% to $297,000 per farm.
Total cash receipts are forecast to decline by 6%.
Forecasts of farm profitability for the next year will differ from state to state depending on regional differences in seasonal conditions and milk production.
Average farm cash incomes are forecasted to decline in all states except Queensland.
This will be due to higher farmgate milk prices and average to above average seasonal conditions, which helped constrain fodder costs.
Total cash costs are forecast to fall by 3%, driven by lower spending on fodder, contract services, and repairs and maintenance.
“The increase for Queensland was due to higher farmgate milk prices and average to above average seasonal conditions, which helped constrain fodder costs,” said the report.
The expected decline in farm cash incomes outside Queensland would be the second consecutive year of falls, adding pressure to some farm businesses.
Recent farm performance
The average farm cash income of dairy farms was estimated to have been A$369,700 (US$) per farm – this was a 21% decline from the previous year.
However, it was 54% higher than the longer-term 10-year average of A$239,300 (US$) per farm, said ABARES.
Average farm business profit declined by 24% to an estimated A$369,700 per farm, which also remained well above the long-term average.
Despite the fall in profitability, average total cash receipts on dairy farms increased by 2%.
This was a result of higher receipts from milk sales – up by 6% – which offset lower farmgate milk prices, which were down by 4%.
The higher number of receipts also meant that the average number of cows milked per farm increased, alongside higher average milk yields per cow.
Still, the lower farmgate milk prices weighed on overall profits.
Furthermore, average total cash costs increased by an estimated 11% as average dairy herd sizes increased.
The average number of dairy cattle in June 2024 was 8% higher than the previous year.
The report said this reflected “a decline in the number of small farms rather than dairy farmers increasing herd sizes during the year”.
