By Kirra Grimes
WHILE many local businesses are suffering under the economic strain of the pandemic, things are looking up in the dairy industry.
Favourable weather conditions, decent milk prices and a new mandatory industry code of conduct have all contributed to a rise in confidence among the region’s dairy farmers, according to local agriculture consultant Matt Harms, who was pleased to be able to share some good news for a change, after a tumultuous period including the milk price crash and collapse of Murray Goulburn.
“Last year was an extremely profitable year for most of South Gippsland,” Matt told the Sentinel-Times from Outtrim last week.
“The milk price was right up the top among the highest paid ever, and despite the grain price being high, the season was exceptional. We had a really good spring, continuing on to a kind summer, and then a wet autumn, so the profitability figures were exceptional.
“That’s rolled into what’s been classed as a wet winter – a traditional South Gippsland winter. And that came into play quite early, which caused some troubles with pasture management – because the paddocks were so damp, you had a lot of animal health issues, a lot of lameness in cows this year.
“But the last six weeks have been relatively kind, for winter. The last month has been quite good, and that’s allowed a few farmers to catch a bit of breath.
“We’ve still got a month or so to go, but the pasture growth’s been very strong, and we’ve got a lot of fodder left over from last year being reasonably good, so that should get us through.
“This season, the prognosis is still very good. The milk price is down about 10 per cent, but we’ve come off a very high figure, so it’s still a good price. The grain price is falling, and that’s expected to continue, due to seasonal conditions in the eastern half of Australia, so you’d expect profitability to be very good again.
“There is a little bit of short-term concern driven by the winter in northern and western Victoria – it’s been extremely dry, and that’s flowing through to a little bit of nervousness around the grain crop, but it’s early days.”
Milk prices and the mandatory code
“We probably haven’t seen as much change as in previous years, in terms of farmers changing processors. It’s been fairly stable, and that’s largely due to the fact the milk price has been strong so there hasn’t been a lot of need to change.
“We’ve seen the first stages of the mandatory code [the Dairy Code of Conduct, which came into effect on January 1, 2020] and the impact of that has been largely positive.
“All processors had to announce their minimum price on the web on June 1, for the first time, under the new system of announcements, and I see that as a really positive step.
“It wasn’t perfect, but it put companies, generally, on a level playing field.
“Farmers weren’t waiting into July or August before they had an opening price, so they were able to make clearer choices, earlier.
“It’s been a positive change, and I think it’s a system farmers will adapt to well. They can make a decision within a timeframe that works for them, which is generally before June 30.
“Comparing processors is still quite difficult, but there’s been a little bit more transparency and breaking down of some of the challenges we’ve had over the last 10 years, where there’s been a lot of muddying of waters around sign-on bonuses and commitment incentives.
“But there’s still too much smoke and mirrors around the pricing system and incentives, and hopefully over time, that gets less. Continuing the removal of commitment bonuses would be a positive move.
“The code in general is more targeted at the northern states, where there’s been a real imbalance in negotiations between processors and farmers.
“We’ve been lucky in Gippsland, that negotiations have been a lot better, and there’s a lot more choice.
“Farmers here are actually enjoying the level of competition for milk at the moment. They feel their milk’s been much more valued, so it’s been a good thing.”
“If we get a good early start to spring, I think this current season is going to be a fantastic one.
“COVID hasn’t really had big impact. What is restricting the industry at the moment is the lack of available dairy land or support land.
“It’s really hard for dairy farmers in our two main shires to expand because of land availability and price.
“They’re competing with people from Melbourne and farmers moving from other parts of the country, as well as beef farmers.
“That is a bit of a limitation, but it’s not going to change.”