Dairy analysts say milk production likely to be lowest in 20 years

In its latest insight report, the Melbourne-based analysts said production had continued a steep decline, first started in late 2015.

In the past four years, nationally the sector had shed 1 billion litres, with northern Victoria losing a third of production, while for western Victoria and South Australia the figure was down by about a quarter.

"Next season, national milk production is likely to be back below 8 billion litres - less than the output for the 1993-94 season," the report said.

Fresh Agenda said the reason wasn't simply climate-driven, as the country had been in a favourable La Nina climate pattern for more than two years.

"No longer is it driven by farmgate milk prices," the report said.

Major factors driving farm exits and the decline in production were that the value of assets were attractive to other producers, a lack of ownership and management succession and ongoing labour shortages.

"Dairy farming is more complex than alternative farm enterprise uses, which have more attractive returns," Fresh Agenda said.

It would take time before output steadied and a substantial reversal in production was not likely, the report found.

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United Dairyfarmers of Victoria president Mark Billing, Simpson, Vic, agreed with the author's reasoning.

"There are a number of dairy farmers pivoting towards beef, even within operations - long term they are still looking to milk cows but looking for a secondary income," Mr Billing said.

"One of the biggest factors is labour, and I think we were starting to see the impact even before COVID-19."

"The lack of backpackers to support the bigger farms, saw the corporate farms that rely on them start to draw on labour from other parts of the industry."

He said margins were still tight, even though the milk price had gone up.

"That creates a stressful situation for farm owners, managers and families.

"There is a lot of choice, for dairy farmers at the moment with the land they have got - are they better off, longer term, looking at lower labour requirements, through beef?"

Mr Billing said farmers who remained in the industry were becoming more resilient, through adapting more automated systems.

'There is still investment going on in the industry, so my belief, long term, is that dairy will thrive and prosper," he said.

"I am confident in the long term, the industry is going to be 'right sized' and one that will be quite sustainable."

Dustin Kemp, Rochester, Vic, milks 180 cows and agreed labour shortages had contributed to a number of farms milking less cows.

"This doesn't always mean farms are selling out, just downsizing," he said.

"One example is a farmer I know was milking 600 cows, but unable to find staff and is now only milking 100.

"The other reason for the downturn is also the increased value in other commodities, which has increased competition in land acquisition."

He said he kept going because he was interested in farming, cows and growing fodder.

"I enjoy the challenge of being more efficient where I can," he said.

"I enjoy figuring out how to tackle each year as it presents itself - because they are all different.

" enjoy the community of farmers that are around me and the camaraderie that comes with it.

"It's like no other industry."

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Doug Hanks, Stony Creek, Vic, said industry leaders and processors were talking down next year's price.

'No wonder dairy farmers are leaving, it's the same old story, over and over again," Mr Hanks said.

"Wages are up, if you can find workers and all the costs of producing milk are still up there - fertiliser, grain, power, insurance, hay, interest payments and land.

"In my opinion, there is little room for growth in the dairy industry in the last 10 years, as beef, sheep and even vegetable farms are competing for the land that suited dairy expansion.

"Never, in my dairy career, have beef and sheep been so profitable."

Mr Hanks said he would calve down 340 Angus cows, aiming to turn off about 300 bullocks a year.

A former Murray Goulburn supplier, he said he "just couldn't handle not having a co-operative".

The drop in production may have had something to do with the collapse of the Bonlac co-operative, "then the stupidity of Murray Goulburn", while governments were "stuffing around with water, in the north".

"No wonder people got out," he said.

"As Fonterra said, they are only here to make profits for New Zealand - you can't blame them for that."

But he said his dairy was still operational, if someone younger wanted to take it over.

'We can turn it on tomorrow, I am not pulling anything of the dairy apart, or selling any of the dairy, its just sitting in mothballs," he said.

"I am too old, I was worn out, I had had enough."

Lachie Sutherland, Larpent, Vic, milks a 380-strong herd and said he wasn't surprised by the figures.

"We all know the beef story, I am sure that has come off a bit now, but over the last four years that has really hit the boil," Mr Sutherland said.

"Maybe people got out because the livestock price has been pretty good."

He said he would be interested to see what was happening in 12 months time to see if production had plateaued.

Kelvin Matthews, Cohuna, Vic, has a 250 cow herd and said dairying was a career he chose, rather than being born into it.

"That's the big difference, if you look into it, you will probably find a lot of them inherited, or took over, farms from another generation," he said.

He was not surprised at the declining milk pool, due to the low prices over a long period.

"People have just had a gutful, I think there are also issues with the whole water job up in the north - I don't think people can adapt to farm, without water," he said.

While it was hard work, he enjoyed the lifestyle.

"There is a lot family time, during the day, when we can go off farm and do things," he said.

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