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A dairy industry in recovery

I’m feeling confident about the future of the Australian dairy industry. Yes, there are a lot of issues affecting us, such as the lingering impact of drought, production costs, discount dairy products, the misleading labelling of non-dairy alternatives as “milk”, and shifts in the global market.

But if there is one thing the COVID-19 pandemic has showed us, with all the panic buying that occurred earlier this year, it is that dairy will always be a staple household item.

And it appears confidence is rising across the industry. The National Dairy Farmer Survey, conducted annually by Dairy Australia, has confirmed that farmer confidence in their own businesses and the future of the Australian dairy industry as a whole has risen over the past 12 months.

While overall confidence remains lower than in 2018 and 2017, 44 per cent of farmers reported feeling good about the future of the industry. This is a marked improvement from last year, when just 34 per cent felt positive about the industry’s future in the survey’s worst ever result, but still far below the historic high of 78 per cent recorded in the 2008 survey, before the Global Financial Crisis.

Even more encouragingly, more than two thirds of farmers surveyed (67 per cent) reported feeling positive about their businesses, a massive 22 per cent jump from last year. This is the highest level reported since Dairy Australia started measuring own business sentiment in 2017.

We can feel buoyed by the fact that there has been an improvement in farmer sentiment on every score since last year, when the ballooning cost of feed and water eroded farm profitability despite stronger than average opening milk prices.

Nearly two thirds of farmers surveyed in 2019 said they were concerned about the cost and availability of feed, while just 43 per cent expect to make an operating profit.

Encouragingly, 70 per cent of farmers surveyed this year expected to make a profit, while 48 per cent of farms anticipated an increase in production volumes for the year ending June 2020.

Significantly more farmers in all but one region reported that they were expecting higher profits in 2020 than have been achieved on average over the past five years. Unsurprisingly, regions with the largest share of profitable farmers also reported the highest levels of confidence in their own business.

All of this comes even as prolonged drought, bushfires and high feed and water costs continued to be major concerns prior to the survey. It seems that farmers are ready to invest in their businesses, buoyed by a favourable start to the season.

As has been reported, these statistics show a dairy industry in recovery, although it is unclear whether this confidence will continue to grow in a post-pandemic environment.

What has been confirmed by Dairy Australia’s June Situation & Outlook Report is that demand for dairy remained strong during the panic buying that accompanied the COVID-19 pandemic.

But while farmers are feeling more positive about their individual businesses, there has only been a modest boost in confidence since last year for the future of the industry. Last year, just 34 per cent of farmers surveyed felt optimistic about the industry’s future – the worst result in the survey’s history.

While there has been a 10 per cent jump in overall confidence this year to 44 per cent, there is still a long way to go before we can approach pre-GFC levels of confidence.

That is the challenge facing the Australian Dairy Plan. A confident industry is one of the Dairy Plan’s key objectives, with a goal to boost milk production up to 9.3 billion litres per year by 2024-25. This would generate more than $600 million annually in extra value at the farm gate and stimulate the growth of at least 1,000 direct new jobs, mostly in rural and regional areas.

There are a lot of factors involved in sustaining a confident industry. But if the trend in farmer confidence continues, I have no doubt that we will go a long way towards achieving our goal over the next five years.

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