Drought knocks 80% off national dairy pay packet

Australian dairy farm profits fell by 80 per cent during the drought - the biggest decline in business profit for 25 years, says a new report by the chief commodities forecaster.

Victorian dairy farms survived the 2001-02 drought with an average milk cheque $100,000 less than the previous years, and a fodder bill almost 20 per cent higher.

The report was undertaken by the Australian Bureau of Agricultural and Resource Economics on behalf of Dairy Australia, the industry's research, trade and marketing arm.

The average Victorian dairy farm had receipts of $402,800 in 2001-02 and $308,100 in 2002-03, while the average fodder bill rose 20 per cent from $78,100 to $92,600.

However, Victorian dairy farmers fared better than their interstate colleagues: nationally, spending on feed rose by an average 30 per cent in 2002-03.

Milk yield on the average Victorian farm fell just 200 litres per cow to 4600 litres, while the average Victorian dairy herd fell slightly from 329 to 312 cows.

Nationally, milk receipts fell an average 20 per cent between the two periods and the study warned they were down even further in 2003-04.

However, preliminary estimates suggested that a big drop in fodder costs had offset any reduction in milk receipts. "A 'modest increase' in dairy business profits is expected for most states," the study said.

It also found that the lift in fodder and water costs had pushed the productivity of Australian dairy farms substantially below that of New Zealand farms for the first time in two decades. Since 1996, Australian dairy farms had been cutting milk production costs compared with NZ.

Philip Hopkins