Drought preparedness key to long-term profitability
Posted on Thursday, January 08, 2015 - Category: In the News
The percentage of Australian dairy farms reported with negative farm business profit is estimated to have decreased significantly from 67 per cent in 2012-13, to 38 per cent in 2013-14, according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).
In addition, the ABARES reported a significant jump in the average rate of return on capital (excluding capital appreciation) to 3.1 per cent in 2013–14, up from 0.9 per cent in 2012–13 and above the ten year average of 2.1 per cent.
Released in December 2014, the ‘Australian dairy: financial performance of dairy farms, 2011-12 to 2013-14’ report correlates improved profitability to the strong rebound in the average farm cash income which increased to $129,000 in 2013-14, around 29 per cent above the 10-year average. Dairy farmers in southern New South Wales, South Australia, Victoria and Tasmania had the largest increases as a result of significant milk price rises, with smaller increases in Western Australia.
Yet, whilst incomes may have ended on a high and negative farm business profit on a low in these states, northern New South Wales and Queensland continue to feel the pinch of higher fodder expenditure and lower production due to dry seasonal conditions, highlighting the relevance of drought preparedness to long-term profitability.
Australian Dairy Farmers (ADF) President, Noel Campbell said whilst many factors, including drought, impact dairy farm profitability, there are some sound principles we can apply to reduce their effects on our farm business returns, with drought preparedness being one of these.
“Farmers need to demonstrate a commitment to long-term sustainable farming through appropriate business and farm practices that embrace effective risk management options,” Mr Campbell said.
“The Government can play a key role in reinforcing its long-term commitment to drought through providing policy options that support farmers in risk management, for example, tax incentives to encourage fodder and water infrastructure investment by farmers.”
ADF continues to actively advocate on tax solutions and other complementary measures that may assist in drought preparedness, including improving the Government and industry’s investment in seasonal forecasting.
Further development of the Managing Climate Variability Program, which promises greater accuracy in midseason forecasting, will enable farmers to make better tactical decisions around managing their fodder and water resources to maximise profit.
Mr Campbell welcomed Minister for Agriculture, Barnaby Joyce’s announced $100 million in Drought Recovery Concessional Loans in December 2014 and the lower interest rates on drought concessional loans announced earlier in January this year, however stressed that further proactive measures need to be taken to achieve long-term drought policy and ensure the ongoing viability of our dairy farm businesses.
ADF will continue to lobby for a range of measures to support drought preparedness management and security to ensure that dairy farmers are supported in sustainable farming practices to manage whatever Mother Nature may bring.
*The ABARES report data is gathered from the annual Australian Dairy Industry Survey, with a sample size of approximately 300 dairy farmers.