DAIRY FARMERS REASSURED BY LONG-TERM DEMAND

Thursday, 4 June 2009

Australian dairy farmers nationwide remain confident of the long-term demand for dairy products, despite many facing a one in 35 year step down in milk price for the 2009–2010 season.

ABARE estimates average farm business profit to fall from $74,100 to –$6,000 in 2008/09 — with the percentage of farms losing money increasing from 38% to 62%.

Despite this, 66% of farmers surveyed in Dairy Australia’s National Dairy Farmer Survey (NDFS) reported they were positive about the future of the industry. Ongoing demand for dairy products was most often cited as the reason behind positive attitudes. While farmer confidence was down from 2008 results (78%), the industry retains a higher proportion of optimistic farmers than in all surveys prior to 2008.

The NDFS examines farmer attitudes and intentions and provides key inputs for the Situation and Outlook report, the annual barometer of the industry, launched by Dairy Australia today.

This year’s survey results showed some significant variance in farmer sentiment between the regions. Dairy Australia’s Managing Director Dr Mike Ginnivan said milk price was nominated by farmers in every region as their greatest challenge.

This year’s survey milk price overtook climate and the availability and cost of production inputs. Climate and the cost and availability of irrigation water were the next most often mentioned challenges.

The impact of the milk price step down this season and the prospect of lower prices in 2009–10 will test farm businesses, particularly in the Lower Murray Darling Basin. While falling input prices may provide some relief, without significant improvement in seasonal conditions farmers will face severe difficulty in trading through the current downturn, according to Dr Ginnivan.

The NDFS indicated that, of the 76% of farmers impacted by the milk price step downs, 24% were planning to extend their debt and a further 24% planned to refinance or defer debt to manage their cash flow.

“The ability and willingness of farmers to restructure their debt and draw on equity, and to realise the value of their assets, as well as their personal and family commitment to continue dairying, will be key factors being weighed up over the coming year.”

While both confidence and planned investment were lower in the 2009 survey, production intentions remained largely unchanged from last year. Almost two thirds of the industry plan to grow their businesses in three years time if price and seasonal conditions were reasonable.