It might be the start of a new financial year, but for many of the region’s dairy farmers it will be the start of a tough season with milk prices dropping below the cost of production.
For northern Victorian dairy farmer Pat Nicholson, an ACM supplier, the drop means a $300,000 reduction in income with the price paid per litre falling from 81¢ to around 70¢.
“We will have to cut back to essential spending only and just do whatever we can to survive in the short term,” Mr Nicholson said.
“We have already made the decision we will not stay on in the industry just to lose money — we will sell up rather than go through that type of financial pressure ever again.”
He said in the short term, the business will look into cutting back stock numbers to reduce feed costs and then reassess the future as the months progress.
It wasn’t all that many years ago the Nicholson family from Girgarre, due to tough industry conditions, sold a large portion of their well-known Jugiong Jersey herd and were on the point of leaving the industry all together.
“Previous generations battled on through tough times and worked for nothing but the current generation won’t put up with that ever again,” Mr Nicholson said.
“Why as dairy farmers should we have to work so hard every day of the year just to lose money or break even if we are lucky, just to prop up the profitability of processors?”
In Mr Nicholson’s opinion, processors have underestimated the impact this decision will have on domestic production moving forward.
“I have already spoken to one person who said after speaking to his financial adviser he was going to offload one of his blocks and a full-time employee — that’s the flow-on effect of these decisions.”
While Mr Nicholson acknowledged the industry is coming off the back of a couple of really good years, the catch up has only come after way too many poor years which tested resilience and saw the Australian dairy industry shrink to its lowest ebb in decades.
“There is still no room in anyone’s budget for a financial loss.
“Over the last two years the milk price just kept jumping up and I understand $10/kg MS might not have been sustainable for processors but $8 isn’t sustainable for us either and we need to find a happy medium or we won’t have an industry at all.”
Mr Nicholson said over the past couple of years his dairy business had invested in some much-needed capital projects, including lasering and collars for the cows.
“A price drop now means we don’t spend and then the businesses in our local community start to suffer — it’s a flow-on effect when we don’t replace the tired old tractor or the ute that won’t start on a frosty morning.
“We add a bit more hay band to fence repairs and we certainly won’t go to the local pub or restaurant for dinner as often as we would previously.
“It is a well documented fact when dairy farmers take a financial knock the whole community is impacted.”
Mr Nicholson said he fears for a whole generation of dairy farmers who are again questioning their future in industry.
“You cannot underestimate the impact this price drop will have on the mental health of our region’s farmers.
“We all thought prices below the cost of production were behind us and this sends a very poor message and will not encourage anyone to invest in this industry.”