Dairy squeeze gripping South Gippsland aired over free dinner

Local dairy farmers are facing an uncertain season as rising operating costs and the prospect of more dry conditions threaten to further squeeze margins that are already tight.

Hazel Park dairy farmer Kelvin Jackson, who milks just over 400 cows, said the past year had placed pressure on his feed supplies after grass growth failed to meet expectations.

Speaking at the recent ‘A Feed and a Yarn’ event, hosted by Agriculture Victoria at the Korumburra Middle Hotel on Friday, July 3, Mr Jackson said his farm had entered last year with about 1300 bales stored in its hay sheds.

At the year’s end, only 50 bales remained.

“That would normally be three years of hay I put away,” he said.

The business also bought cereal hay to keep the herd fed, while Mr Jackson identified higher fuel prices as a big source of pressure, especially in the second half of the year.

He expected farmgate returns this season to fall somewhere between $9 and $10 per kilogram of milk solids, although he emphasised that the final result would depend on seasonal conditions and the pricing arrangements applying to each farm.

He said farmers would be hoping to average in the mid-$9 range.

“It would be much better if it went to $10, because that little bit of extra money gives farmers a bit of breathing space,” Mr Jackson said, though continuing to say that it’s difficult to nominate one break-even price for the entire industry.

Agriculture Victoria’s latest Dairy Farm Monitor results help illustrate some of the pressure across Gippsland during 2024-2025.

Among the project’s 25 participating Gippsland farms, the average milk price fell 10 per cent to $8.41/kgMS.

Simultaneously, feed costs went the other way, rising 11 per cent to $4.21/kgMS, while interest and lease costs also increased by 11 per cent.

Average earnings before interest and tax fell from $2.53 to $1.09/kgMS, while average net farm income also dropped from $1.36 to negative 20 cents/kgMS.

Only 19 of the 25 participating farms recorded a positive return on total assets.

It’s important to note that this sample doesn’t represent every Gippsland dairy business, but it does provide somewhat of a concerning snapshot of the financial conditions experienced by the farms that participated.

However, Agriculture Victoria Dairy South East regional manager Del Delpitiya confirmed that financial pressures were being felt across the dairy sector.

“Financial pressures are a common topic of conversation across the dairy industry, and industry analysis has highlighted that rising input costs continue to place pressure on farm profitability and business confidence,” he said.

On top of all of that, the Bureau of Meteorology confirmed in mid-June that El Niño was underway, with below-average rainfall likely across parts of southern and eastern Australia from July to September.

Mr Delpitiya said spring could bring opportunities for farmers, but it also required careful preparation.

“Spring presents opportunities, but it also requires careful planning around feed supply, pasture management, water availability, workforce requirements and overall business performance,” he said.

Mr Jackson echoed that sentiment, also stating that the possibility of a dry summer made early planning very important, especially when it comes to feed and water.

His farm had managed to maintain its herd numbers because it was confident it could source enough fodder. About half the hay used during the difficult year had since been replaced, partly through production on the farm and partly through purchases.

Despite the pressure, Mr Jackson said there was no single solution beyond operating farms as efficiently as possible, and he encouraged producers to maximise pasture growth, use that feed effectively and negotiate carefully when purchasing fertiliser and other inputs.

“The milk price is going to be what it’s going to be, so we’ve got to concentrate on the things that we can control,” he said.

The ‘Feed and a Yarn’ event in Korumburra attracted 26 registrations and gave local farmers a chance to share their thoughts over a free meal.

The Korumburra event was one of four sessions being delivered by Agriculture Victoria across Gippsland to bring dairy farmers together to share ideas about managing drought and hear how others are approaching similar challenges.

Funded by the Farm Business Resilience Program, the events are aimed at supporting Gippsland dairy farmers with drought preparedness and planning for the upcoming spring and summer seasons.

Mr Jackson said those conversations were particularly valuable for those in a profession where it’s very easy to become isolated on your own property.

“You talk to other farmers, and you realise it’s not just you,” he said.

“Sometimes you come away and just feel a little bit better.”

Despite every challenge, Mr Jackson remains immensely positive about dairy farming in the region.

“I really believe the industry has got a good future,” he said.

“We’ve been through a tough, tough year, but we’ve just got to recognise that was the year it was, and this year will be better.

“Stay positive, but when you’re feeling it, go and have a chat to your neighbour or one of your friends.”