October 23, 2019

  

Outlook dire for Australian dairy farmers with high water, feed costs: report

 

The outlook remains dire for many dairy farmers, with record farm gate prices offset by hugely expensive irrigation water, high feed costs, and a dry weather outlook, according to Dairy Australia's latest industry report, The Australian reported.

 

The report says another warm and dry winter has impacted feed cost and availability, while the cost of irrigated water has continued to increase for farmers in the Murray region.

 

The strong farm gate milk prices reflected buoyant international commodity prices and strong competition for milk supply among processors due to reduced Australian milk production.

 

Australian milk production fell 6.9% in the season to August as a result of cost pressures, low rainfall in some regions and decrease in herd numbers.

 

In recent weeks the price on the spot market for a megalitre of water has skyrocketed from a long-term average of $135 to more than $800 (AUD 1 = US$0.68).

 

Many farmers have accused companies which are pure water traders such as publicly listed Duxton Water Ltd of hoarding, speculating, and driving a spike in prices.

 

Duxton Water's director of water assets, Alister Walsh, denied the allegations, saying Duxton was a long-term investor rather than a speculator.

 

Walsh told ABC radio the company had built up a water 'portfolio', but denied this constituted hoarding, saying the company offered medium and long term leases of water to farmers who did not want to commit capital in expensive permanent entitlements.

 

Asked if in addition to buying permanent water entitlements, Duxton Water was playing the spot market, Walsh said, "We actually manage our usable water component."

 

In terms of its feed supply forecast, Dairy Australia said supplies remain tight with a dry outlook for the remainder of the year with drought conditions continuing in some regions.

 

The group maintained its forecast of a 3-5% decrease in national milk production to 8.3-8.5 billion litres for the full season.

 

Dairy Australia senior industry analyst John Droppert said, "There is a mixed picture across the country. For many farmers in southern Australia, good early-season rainfall has provided a head start on pasture growth and fodder conservation, but those in drought-affected areas further north are facing a second season with few palatable options."