Scientists have been given $55 million to chart the environmental footprint of the Australian cow.
The five-year project is aiming to reduce climate emissions and create a more profitable and sustainable dairy sector.
The research also aims to help breed more productive cows which "produce fewer emissions".
Victorian Agriculture Minister Mary-Anne Thomas has launched DairyBio21-26 - a research partnership between industry and government to address many of the issues facing dairy farmers.
"DairyBio21-26 will support our world-leading scientists to meet the challenges facing our dairy industry head-on and to deliver practical solutions to our dairy farmers as they adjust to operating under a changing climate," Ms Thomas said.
Dairy Australia chairman James Mann said DairyBio 21-26 continued to focus on two of the main drivers of industry success, improving the cattle herd and pastures.
The partnership with Dairy Australia and the Gardiner Dairy Foundation will support scientific research focused on genetic improvements to animals and forage species.
The long-term vision was to provide farmers with the tools and information they needed to breed and feed cows that produce more milk, healthier calves and less methane under a changing climate.
As a result of climate change and other regulatory and trade changes, forecasts suggested that dairy farmers will need to increase their productivity by 1.5 per cent per year to maintain profitability.
Gardiner Foundation chair Dr Len Stephens said many technologies from DairyBio were already available and delivering significant value to farmers today.
"The next five years of DairyBio will bring about a broader range of outputs, including some exciting new forage cultivars, that will deliver sustained value to dairy farmers," Dr Stephens said.
DairyBio21-26 will support scientists to meet this challenge, targeting an additional value of $200 per cow each year for Australian dairy herds by 2040.
This will be achieved through genetic improvements that will result in cows that live longer and produce fewer emissions - with the flow-on benefits of reduced costs.
Victoria's dairy industry leads the nation, accounting for 77 per cent of Australia's dairy exports - valued at $2.1 billion - with the gross value of milk produced in Victoria worth $2.7 billion (2018-19).
- courtesy Stock and Land, Victoria.
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