March 13, 2013

South Australia's dairy industry declines

As its dairy farmers are declining significantly, the dairy industry is on the verge of becoming non-existent in the mid-north of South Australia.

There are 16 dairy farmers that still operate in the mid-north and the Barossa, a significant drop compared to 30 years ago where there were 475 dairy farmers. Interestingly, despite the number of dairy farmers declining, the supply of milk has only dropped 10 million litres to 18 million litres in that time.

Gary Zweck and his family have been dairying since the 1970s near Blyth, he says times are tough.

"Our business has been treading water for the last six years, we have been aiming to try and milk two million litres a year, but we have been a bit under that. The market signals have not been great, and we have not invested heavily in infrastructure, a lot of our equipment and machinery has band aids all over it."

He said they have had three droughts since 2002, which has driven down equity; also land prices have softened, and fodder and water costs have escalated. He added that milk prices have not kept up with inflation.

The average prices farmers are receiving range from AUD0.38-0.39 (US$0.39-0.40) a litre, with cost of production between AUD0.42-0.45 (US$0.43-0.46) a litre, that's a loss of AUD0.05 (US$0.052) a litre for farmers.

Andrew Koff, chair of the Mid North and Barossa Milk Cooperative said if the climate does not improve, he believes the number of dairy farmers in the region will drop to eight in five years' time. He said they have lost four dairy farmers in the last four months due to bank foreclosure.

Koff said since deregulation in the early 2000s, New Zealand has been able to lift its production from 10 billion to 19 billion litres in the same period of times, and Australia has dropped from 12 to 9 billion litres.

Icecream company Golden North who runs a factory in the mid-north town of Laura sources three million litres of milk annually. They are not concerned by the current issues facing dairy farmers, as their supply is secured through Murray Goulburn.