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Dairy industry

Industry overview

The dairy industry makes an important contribution to the Australian economy. In 2016–17 it accounted for around 6 per cent ($3.7 billion) of the gross value of agricultural production and around 6 per cent ($3.0 billion) of agricultural export income.

The results below are for farms included in the Australian Dairy Industry Survey (ADIS). The ADIS is funded by the Department of Agriculture and Water Resources. Data are provided at national and regional scales, with regions based on those used by Dairy Australia.

Australian dairy regions

Source: ABARES

Key drivers of farm income

Farm financial performance

  • Average farm cash income of Australian dairy farms is projected to decline by around 42 per cent in 2018–19 to $93,000 per farm. The major influence on the financial performance of dairy farms in 2018–19 is drought in much of south-eastern Australia.
  • At the national level, the effect of the current drought on most measures of farm financial performance is not expected to be as severe as previous droughts for dairy farms
  • In 2018–19 average farm cash income is projected to decline in all regions except Gippsland and Tasmania.

Detailed farm financial performance findings

Frederick Litchfield, Aruni Weragoda and Dale Ashton

Farm cash income and profit

The major influence on the financial performance of dairy farms in 2018–19 is drought in much of south-eastern Australia. Average farm cash income is projected to decline by around 42 per cent in 2018–19 to $93,000 per farm (Table 1).

Lower crop production is contributing to higher prices for fodder and feed-grains. The drought has also reduced the availability of pasture on dairy farms in drought-affected regions, increasing expenditure on purchased feed. Dairy farmers in the Murray region have also been faced with higher water prices because of increased competition for scarce supplies. Overall, slightly higher milk prices are expected to be offset by decreased average milk production per farm and increased expenditure on fodder.

At the national level, the effect of the current drought on farm cash income is not expected to be as severe as previous droughts for dairy farms (Figure 1).

Table 1 Farm financial performance, dairy farms, 2016–17 to 2018–19
average per farm
Performance measure Unit 2016–17 2017–18p 2018–19y
Australia
Total cash receipts $ 711,510 836,000 801,000
Total cash costs $ 620,680 674,000 707,000
Farm cash income $ 89,640 161,000 93,000
Farm business profit $ –8,230 92,700 –55,000
Rate of return a % 1.3 3.1 0.2
Subtropical
Total cash receipts $ 631,530 680,000 623,000
Total cash costs $ 478,640 534,500 558,000
Farm cash income $ 152,890 145,500 65,000
Farm business profit $ 67,520 16,500 –95,000
Rate of return a % 2.8 1.4 –1.2
New South Wales
Total cash receipts $ 985,330 1,135,000 1,044,000
Total cash costs $ 786,940 934,500 974,000
Farm cash income $ 198,390 200,500 70,000
Farm business profit $ 81,530 93,300 –124,000
Rate of return a % 2.6 2.7 –0.7
Murray
Total cash receipts $ 593,960 712,500 650,000
Total cash costs $ 557,800 579,100 638,000
Farm cash income $ 36,170 133,500 12,000
Farm business profit $ –81,820 57,000 –136,000
Rate of return a % –0.7 2.6 –2.5
Gippsland
Total cash receipts $ 612,660 710,500 669,000
Total cash costs $ 589,510 640,500 589,000
Farm cash income $ 23,150 70,000 80,000
Farm business profit $ –90,160 36,100 –46,000
Rate of return a % 0.2 2.0 0.3
Western Victoria
Total cash receipts $ 704,480 842,800 818,000
Total cash costs $ 594,770 616,300 689,000
Farm cash income $ 109,720 226,600 130,000
Farm business profit $ 48,130 173,800 –20,000
Rate of return a % 2.6 5.3 1.3
South Australia
Total cash receipts $ 857,990 1,050,200 1,150,000
Total cash costs $ 727,010 897,900 1,035,000
Farm cash income $ 130,980 152,300 116,000
Farm business profit $ 15,390 85,100 –58,000
Rate of return a % 1.8 2.5 0.2
Western Australia
Total cash receipts $ 1,424,320 1,393,900 1,325,000
Total cash costs $ 1,003,120 1,051,500 1,050,000
Farm cash income $ 376,380 303,000 218,000
Farm business profit $ 265,140 176,100 58,000
Rate of return a % 3.7 2.8 1.6
Tasmania
Total cash receipts $ 926,880 1,198,600 1,283,000
Total cash costs $ 829,420 916,400 982,000
Farm cash income $ 97,460 282,200 301,000
Farm business profit $ 31,720 223,300 172,000
Rate of return a % 2.5 5.6 4.3

p Preliminary estimate. y Provisional estimate. a Excluding capital appreciation.
Source: ABARES Australian Dairy Industry Survey


Farm cash income in 2018–19 is projected to be 9 per cent below the median since 1989–90 in real terms. The fall in farm cash income in other major drought years was more pronounced for dairy farms, such as in 2006–07 which was 71 per cent below the median since 1989–90.

Figure 2 shows that for Australian dairy farms the farm cash income projected in 2018–19 is expected to be within the middle 50 per cent of years. However, the most drought affected regions—Subtropical, New South Wales and Murray—are in the worst 25 per cent of years.


Farm business profit is a measure of long-term profitability. It accounts for capital depreciation, payments for family labour and changes in inventories of livestock, fodder and grain held on farm.

At the national level, farm business profit increased significantly from an average of –$8,230 per farm in 2016–17 to $92,700 per farm in 2017–18. In 2018–19, farm business profit is projected to decline significantly to –$55,000 per farm.

Over the 10 years to 2017–18 the proportion of dairy farms recording negative farm business profit averaged 48 per cent a year. In 2018–19, the proportion of farms with negative farm business profit is projected to be around 66 per cent (Figure 3).

Negative farm business profit means a farm has not covered the costs of unpaid family labour or set aside funds to replace depreciating farm assets. Many farms occasionally record negative farm business profits when their income fluctuates. However, ongoing low or negative profit affects long-term viability because farms have reduced capacity to invest in newer and more efficient technologies.

On average 15 per cent of dairy farms recording negative farm business profit in any given year from 2000–01 to 2017–18 have recorded a positive profit in the following year.


Total cash receipts

At the national level, total cash receipts for dairy farms increased by around 17 per cent in 2017–18, on average, as a result of higher milk production and prices. The changes in average milk prices received varied across the different dairy production regions, ranging from an increase of 20 per cent in Tasmania to a decline of 2 per cent in Western Australia. Milk yields per cow were higher in all regions except New South Wales and Western Victoria.

At the national level, average total cash receipts are projected to decline by 4 per cent in 2018–19 to around $801,000 per farm (Table 1), largely as a result of decreased milk production in most regions.

Total cash costs

Dry conditions across several regions pushed expenditure on key inputs higher in 2017–18. Average total cash costs for Australian dairy farms increased by around 9 per cent to $674,000 per farm (Table 1). This increase was mainly a result of increased expenditure on purchased feed as a result of higher feed grain prices and increased demand due to dry seasonal conditions. Hired labour, fertiliser and repairs and maintenance also increased in 2017–18. In 2018–19, average total cash costs are projected to increase by a further 5 per cent mainly as a result of increased expenditure on feed.

From 2000–01 to 2018–19 expenditure on fodder was the largest component of total cash costs, accounting for 30 per cent over the period (Figure 4). Interest, repairs and maintenance, fertiliser and hired labour were the next largest components of total cash costs from 2000–01 to 2018–19.

A majority of Australian dairy farmers supplement pasture-based production by feeding grains, concentrates and by-products to cattle in order to increase milk yield per cow. The use of grains and concentrates as supplement feeding therefore has become an increasingly large component of dairy farm inputs in recent decades. Increased reliance on supplementary feeding has resulted in increased exposure of dairy farmers to unfavourable seasonal conditions and changes in the prices of purchased feed (hay and feed grains).


Performance by region

The financial performance of dairy farms in 2017–18 and 2018–19 varied across the regions, reflecting differences in exposure to drought (Figure 5). A majority of dairy farmers in the Subtropical, New South Wales, Murray and Gippsland regions reported below average or drought seasonal conditions in 2017–18 and 2018–19.

Dairy farms in the Subtropical region have faced an extended period of drought and below average seasonal conditions. After reaching a peak in 2016–17, farm incomes in the Subtropical region declined in 2017–18 and 2018–19 (Figure 6). Reduced milk production because of fewer cows milked, combined with higher fodder costs, were the main reasons for lower incomes.

New South Wales had fewer dairy farmers reporting below average seasonal conditions in 2018–19 compared with 2017–18. This was mainly because of better rainfall in the North Coast and Hunter areas. Nevertheless, farm income for New South Wales dairy farms is projected to fall substantially in 2018–19. Overall milk production for the region is expected to be lower and fodder costs significantly higher.

Seasonal conditions worsened in the Murray region in 2018–19. Reduced milk production and higher costs for fodder and irrigation water is projected to contribute to Murray dairy farms recording their lowest average farm cash income in over 20 years. Average farm cash income in the Gippsland region is projected to increase slightly in 2018–19 because many dairy farms that had access to irrigated pastures were not as affected by higher fodder costs as other regions.

The proportion of Western Victorian dairy farms reporting below average to dry seasonal conditions increased in 2018–19. Average farm cash income in the Western Victoria region is expected to fall by around 43 per cent in 2018–19 as a consequence of reduced milk production and markedly higher costs for purchased feed.

Dairy farmers in South Australia are projected to record a decline in average farm cash income (by 24 per cent) in 2018–19. Costs are expected to increase in 2018–19 more than offsetting a small increase in milk receipts.

On average, farm cash income in Western Australia is projected to decline by 28 per cent in 2018–19. Milk production is projected to be relatively unchanged, while expenditure on purchased feed is projected to increase because of higher fodder prices driven by demand in eastern states.

Tasmania was the opposite of most other dairy regions. Good seasonal conditions and less dependence on purchased feed is projected to contribute to increased milk production and higher average farm cash income in 2018–19.



Rate of return

From 2016–17 to 2017–18 the average rate of return (excluding capital appreciation) of Australian dairy farms increased from 1.3 per cent to 3.1 per cent (Figure 7). The average rate of return is projected to decline to around 0.2 per cent in 2018–19, well below the long-term average.


The performance of individual dairy farms varied widely in 2017–18 and 2018–19 (Figure 8). In 2017–18, around 17 per cent of dairy farms recorded a negative rate of return (excluding capital appreciation) and 41 per cent recorded a rate of return between zero and 5 per cent. The remaining 42 per cent of dairy farms recorded a rate of return above 5 per cent.

In 2018–19, 44 per cent of dairy farms are projected to have a negative rate of return. An estimated 46 per cent of dairy farms are projected to have a rate of return between zero and 5 per cent and the remaining 10 per cent are projected to have a rate of return above 5 per cent.


Variation in rate of return

The long-term performance of farm businesses is determined by the level and variability of profits. Variations in the rate of return reflect changes over time in average seasonal conditions, commodity prices and the cost of farm inputs recorded in each region. Individual farms are likely to have experienced different variations in the rate of return over the period. These are a result of farm-specific factors such as seasonal conditions, prices received, enterprise mix and the skills of the manager.

Between 2000–01 and 2018–19 the annual average rate of return (excluding capital appreciation) for Australian dairy farms was positive in all years except the drought years of 2002–03 and 2006–07. However, average rates of return by region vary.

Dairy farmers in Western Australia recorded the lowest variation in the average annual rate of return over the period while the Murray region had the greatest overall variation in the rate of return (Figure 9).

Farm debt and equity

  • Average farm debt of Australian dairy farms increased by around 10 per cent to $1,065,200 in 2017–18 (in real terms) and is projected to decrease by 8 per cent in 2018–19.
  • The average equity ratio of dairy farms at the national level declined from 85 per cent in 2004–05 to an estimated 80 per cent in 2017–18.

Detailed debt and equity findings

Frederick Litchfield, Aruni Weragoda and Dale Ashton

Trends in average debt per farm

Debt is an important source of funds for farm investment and ongoing working capital for many dairy farms. At the national level, from 2000–01 to 2017–18 average debt of dairy farms trended upwards in real terms, mainly as a result of an increase in average farm size (Figure 10). Average debt of dairy farms increased by around 10 per cent in 2017–18, but is projected to decline by 8 per cent in 2018–19 to around $985,000 per farm. Aggregate debt across all dairy farms has declined as some dairy farms have been sold for non-dairy land uses.

In ABARES farm surveys, debt is recorded by its main purpose. However, because some loans cover a range of purposes, estimates of debt by main purpose provide a guide only.

Over the 3 years to 2017–18, land purchases accounted for the largest proportion of dairy farm debt, around 42 per cent on average (Figure 11). A further 32 per cent of debt was for working capital and 12 per cent was reconstructed debt. The remaining debt was for a range of purposes such as vehicles, machinery, buildings and structures.

Equity ratio

The average equity ratio of dairy farms at the national level declined from 85 per cent in 2004–05 to an estimated 80 per cent in 2017–18. Debt levels increased in line with increased average herd sizes and milk production over the period. However, declining land values offset high levels of new investment in some regions (Tasmania, Western Victoria and South Australia) and resulted in average total farm capital increasing at a slower rate than farm debt.

Around half of all dairy farms had equity ratios of 70 to 90 per cent in 2017–18, with an average milking herd of 284 cows (Table 3). An estimated 29 per cent of dairy farms had an equity ratio greater than 90 per cent. On average these farms are relatively small with an average milking herd of 177 cows. The remaining 21 per cent of dairy farms had an equity ratio of less than 70 per cent. These are relatively large farms with higher than average herds and milk production.

Table 3 Farm Performance, by equity ratio, dairy farms, Australia, 2017–18
average per farm
Measure Equity ratio
Unit More than 90% 70 to 90% Less than 70%
Proportion of farms % 29 49 21
Total area operated ha 237 312 320
Number of dairy cows milked no. 177 284 314
Total milk production l 1,060,200 1,534,300 1,902,800
Milk receipts $ 511,600 719,300 864,800
Total cash receipts $ 596,600 821,800 1,006,500
Total cash costs $ 459,600 663,500 832,500
Farm cash income $ 137,000 156,000 173,900
Milk receipts as a proportion of total receipts % 86 88 86

Note: Based on preliminary estimates.
Source: ABARES Australian Dairy Industry Survey

Debt-servicing capacity

The long-term viability of a farm is affected by its capacity to service debt. The servicing of debt consists of making interest payments and paying down the principal. The proportion of farm receipts spent on interest payments is a useful indicator of short-term capacity to service debt. National short and long term interest rate data is available in the following table Australian main macroeconomic indicators.

From 2000–01 to 2017–18 the proportion of farm receipts needed to fund interest payments fluctuated around an average of 8 per cent. The ratio of interest paid to total cash receipts for 2018–19 is projected to be around 6 per cent, the lowest since 2001–02 (Figure 12). Reduced interest rates, increased cash receipts and a reduction in total debt have all contributed to the decrease in the ratio of interest paid to total cash receipts since 2012–13.

At the national level, around 60 per cent of dairy farms reduced their average total debt in 2017–18, while 30 per cent of farms increased their debt (Figure 13). This is the largest proportion of farms reducing debt in any given year since 2000–01.

At a regional level, the Murray region had the highest proportion of farms reducing their average total debt in 2017–18 (84 per cent). Gippsland had the second highest (70 per cent), while Tasmania had only 35 per cent of farms reducing their total debt in 2017–18, compared to 52 per cent that increased average total debt.

Nationally, there was no significant difference in the size of farms reducing debt compared with those that increased debt (Table 4). However, cash incomes were around 24 per cent lower for those reducing debt because this group includes a number of farms that are exiting the industry.

Table 4 Farm performance, by change in debt, dairy farms, Australia, 2017–18
average per farm
  Unit Reducing debt Increasing debt
Proportion of farms % 60 30
Total area operated ha. 300 290
Number of dairy cows mated no. 258 281
Total milk production l 1,434,300 1,710,700
Milk receipts $ 665,900 808,800
Milk receipts as a proportion of total receipts % 86 88
Total cash receipts $ 772,300 923,000
Total cash costs $ 636,700 740,300
Farm cash income $ 135,600 178,800
Equity ratio % 82 72

Note: Based on preliminary estimates.
Source: ABARES Australian Dairy Industry Survey

Debt and equity, by region

Debt and equity on dairy farms varied significantly by region. Dairy farms in Tasmania recorded the highest farm business debt on average. This was a result of the relatively high proportion of large farms and recent expansion in dairy production in that region (Figure 14).

From 2015–16 to 2017–18, land purchase debt accounted for the largest share of average debt of dairy farms in most regions, followed by ongoing working capital debt. This was the case for all regions except Western Australia and Tasmania, in which ongoing working capital debt accounted for the largest share of total debt on average (Figure 11).

The lowest average equity ratios were recorded in Tasmania, reflecting rapid expansion in the industry since the mid-2000s (Figure 15).

Distribution of dairy farms, by debt and equity

Table 5 shows the distribution of dairy farms by debt and equity ratio at 30 June 2018. An estimated 5 per cent of all dairy farms in Australia held no debt. A further 15 per cent of farms held less than $100,000 in debt. An estimated 34 per cent of dairy farms held debt in excess of $1 million.

Table 5 Distribution of farms, by farm business debt and equity ratio, dairy farms, Australia 30 June 2018
percentage
Equity ratio No debt Less than $100,000 $100,000 to less than $250,000 $250,000 to less than $500,000 $500,000 to less than $1m $1m to less than $2m More than $2m Total
Greater than or equal to 90% 5 15 6 2 1 0 0 29
80 to less than 90% 0 0 0 3 19 4 1 27
70 to less than 80% 0 0 0 1 10 7 4 23
60 to less than 70% 0 0 0 0 0 4 5 9
Less than 60% 0 0 0 0 3 1 9 12
Total 5 15 6 6 33 16 18 100

Note: Based on preliminary estimates. Row and column totals may not sum to 100 due to rounding.
Source: ABARES Australian Dairy Industry Survey

Farm capital and investment

  • The total value of capital for Australian dairy farms increased by 41 per cent in real terms from 2000–01 to 2016–17, although the number of dairy farms declined.
  • On average, 62 per cent of dairy farms each year made additions to their total capital over the 10 years to 2016–17.

Detailed farm capital and investment findings

James Frilay and Dale Ashton

Total farm capital

From 2000–01 to 2016–17 the gross value of Australian dairy production decreased by 16 per cent in real terms to an estimated $3.7 billion. Over the same period the number of dairy farms declined by 42 per cent and, consequently, the gross value of production per farm increased.

Investment in farm capital is important for the ongoing development of the Australian dairy industry. New and more efficient technologies are important for farm productivity, and investments in land, fixed improvements, and plant and equipment are key drivers of dairy farmers’ capacity to generate farm outputs.

The total value of capital for Australian dairy farms increased by 41 per cent in real terms from 2000–01 to 2016–17, although the number of dairy farms declined (Figure 16). On a per farm basis, total capital increased by 142 per cent to around $4.8 million per farm in 2016–17, largely because of increasing average farm sizes and appreciation in land values.

Figure 16 Total value of capital and number of farms, dairy farms, Australia, 2000–01 to 2016–17
p Preliminary estimate.
Source: ABARES Australian Dairy Industry Survey

Land accounted for an average of 75 per cent of total capital per farm from 2012–13 to 2016–17 (Figure 17). Livestock accounted for a further 15 per cent of total capital, and plant and equipment accounted for about 10 per cent.

Figure 17 Components of capital, dairy farms, Australia, 2012–13 to 2016–17
average per farm

Source: ABARES Australian Dairy Industry Survey

Return on land

ABARES uses two rates of return to farm capital—rate of return excluding capital appreciation and rate of return including capital appreciation. Rate of return is defined as farm profit expressed as a percentage of total capital. Because land is the largest component of total farm capital, it plays a key role in determining changes to total farm returns over the medium to longer term.

Figure 18 shows the average value of land and fixed improvements per hectare. In real terms, the average annual return from land appreciation from 2000–01 to 2016–17 was 4.3 per cent per year. From 1990–91 to 1999–2000 the average annual return from land appreciation was negative, at –1.6 per cent per year before stronger demand for farm land led to sharp increases in land values. From 2000–01 to 2006–07 the average annual return from land appreciation was 12.1 per cent per year before declining to an average of –1.8 per cent per year from 2007–08 to 2016–17.

Figure 18 Value of land and fixed improvements per hectare, dairy farms, Australia, 1989–90 to 2016–17
p Preliminary estimate.
Source: ABARES Australian Dairy Industry Survey

New farm investment

Most farmers make new investments each year to add to the existing capital stock or to replace capital items that have reached the end of their useful life. Farm investments are usually made with longer-term outcomes in mind and based on expected returns over the life of the investment.

On average, 59 per cent of dairy farms each year made additions to their total capital over the 10 years to 2015–16 (Figure 19). The average amount invested each year by those making capital additions fluctuated around an average of $214,000, broadly in line with movements in farm cash incomes.

In 2016–17 an estimated 69 per cent of dairy farms made capital additions at an average of $133,000 per farm.

Figure 19 Total capital additions, dairy farms, Australia, 2000–01 to 2016–17
proportion of farms and average per farm
p Preliminary estimate.
Note: Total capital additions is the average of those farms making capital additions.
Source: ABARES Australian Dairy Industry Survey

Figure 20 shows the average proportion of dairy farmers that made capital additions each year from 2012–13 to 2016–17 and the average capital addition in three categories—land purchases, plant and equipment, and buildings and structures. Land is the biggest component of capital additions each year, although only 11 per cent of dairy farmers bought land each year on average between 2012–13 and 2016–17. Average expenditure on land for those making purchases was around $855,000 per farm.

Around 57 per cent of all dairy farmers made additions to plant and equipment each year over the period, at an average of around $62,000 per farm. Around 7 per cent of dairy farmers made additions to buildings and structures. Expenditure on these capital additions averaged around $114,000 per farm.

Figure 20 Components of capital additions, dairy farms, Australia, 2012–13 to 2016–17
proportion of farms and average per farm in category
Source: ABARES Australian Dairy Industry Survey

Capital and investment by region

In most dairy regions, trends in farm capital and number of farms follow the national trends. The three Victorian regions have the most influence on national trends because those regions account for two-thirds of Australia’s milk production.

The number of dairy farms fell in all regions, with the largest decreases being in the Subtropical and Murray regions (Figure 21). Despite the ongoing decrease in farm numbers in the Murray region, the total value of capital for dairy farms in the region has been increasing since 2010–11 (Figure 22). Similarly, the number of farms in the Gippsland region has trended downwards over time, while the total value of capital has increased since 2011–12. As a result of this increase, the Gippsland region accounted for 25 per cent of the total capital of dairy farms in 2016–17

Figure 21 Number of dairy farms, by region, 2000–01 to 2016–17
p Preliminary estimate.
Source: ABARES Australian Dairy Industry Survey

Figure 22 Total value of capital, dairy farms, by region, 2000–01 to 2016–17
p Preliminary estimate.
Source: ABARES Australian Dairy Industry Survey

From 2000–01 to 2016–17 the number of dairy farms fell by 44 per cent in the Murray region and by 21 per cent in the Gippsland region. Despite these declines, the total value of capital increased in real terms by 38 per cent in the Murray region and 122 per cent in the Gippsland region. The Murray region accounted for 21 per cent of the total capital value of Australian dairy farms in 2016–17.

The number of dairy farms in the New South Wales region fell by 45 per cent but the total capital value of dairy farms in the region rose by 24 per cent in real terms, accounting for around 9 per cent of the total capital value of Australian dairy farms in 2016–17.

In Tasmania, the total value of capital increased by 86 per cent in real terms over the same period and the number of dairy farms declined by around 34 per cent. Tasmania accounted for 8 per cent of the total capital value of Australian dairy farms in 2016–17.

The total capital value of dairy farms in South Australia increased by 10 per cent in real terms between 2000–01 and 2016–17 and the number of dairy farms declined by 59 per cent. Average total capital increased by 167 per cent to $5.7 million per farm. South Australian dairy farms accounted for 5 per cent of the total capital value of Australian dairy farms in 2016–17.

The total capital value of dairy farms in Western Australia declined by 8 per cent between 2000–01 and 2016–17 and the number of dairy farms decreased by 60 per cent. Average total capital increased by 128 per cent to $10 million per farm. Western Australian dairy farms accounted for 6 per cent of the total capital value of Australian dairy farms in 2016–17.

From 2000–01 to 2016–17 the total capital value of dairy farms in the Subtropical region declined by around 36 per cent due to a substantial decline in the number of dairy farms (73 per cent). The region accounted for around 8 per cent of the total value of capital in 2016–17.

The proportion of dairy farms adding new investments over the five years to 2016–17 was largest in Western Australia, Western Victoria and Tasmania (Figure 23).

Figure 23 Proportion of farms making capital additions, dairy farms, by region, 2012–13 to 2016–17
Source: ABARES Australian Dairy Industry Survey

Physical characteristics

  • From 2000–01 to 2016–17 the total number of Australian dairy farms fell by around 51 per cent. Most of this decline was in Victoria.
  • Despite the decline in the number of dairy farms, Victoria still accounted for 64 per cent of total milk production, followed by New South Wales (12 per cent) and Tasmania (9 per cent).

Detailed physical characteristics findings

Aruni Weragoda, James Frilay and Dale Ashton

In 2016–17 an estimated 5,800 dairy farms were registered in Australia (Dairy Australia 2018). Around 67 per cent of these farms were in Victoria, 11 per cent in New South Wales, 8 per cent in Tasmania, 7 per cent in Queensland, 4 per cent in South Australia and 3 per cent in Western Australia.

From 2000–01 to 2016–17 the total number of Australian dairy farms fell by around 51 per cent. Although most of this decline was in Victoria, the largest percentage decline was in Queensland (Figure 24).

Figure 24 Number of dairy farms, by state, 2000–01 to 2016–17
p Preliminary estimate.
Source: Dairy Australia

Over the past 30 years, the structure of the Australian dairy industry has changed markedly. Restructuring has been driven by a range of factors, including:

  • changing world dairy product markets
  • prolonged drought in the mid 2000s
  • discontinuation of regulated sourcing and pricing of drinking milk in 2000
  • cessation of the Domestic Market Support Scheme for manufacturing milk prices.

Despite fewer resources being used for milk production, restructuring has promoted a more efficient industry and enabled growth in the gross value of Australian dairy production per farm in real terms. Dairy farmers have adapted by increasing the size and intensity of their operations, with more cows per farm, higher stocking rates and greater use of supplementary feeding.

Trends in physical characteristics, by state

The concentration of Australian milk production among the states has shifted somewhat, with Victoria and Tasmania expanding and all other states contracting (Figure 25). Victoria is the largest milk producer, accounting for an estimated 64 per cent of total milk production in 2016–17, followed by New South Wales (12 per cent) and Tasmania (9 per cent).

Figure 25 Share of milk production, dairy farms, by state, 2000–01 to 2016–17
p Preliminary estimate.
Source: Dairy Australia

From 2000–01 to 2016–17 Tasmanian milk production increased by 42 per cent. This was the largest increase of any state (Figure 26). Total milk production in Western Australia remained steady, despite declining numbers of cows milked, as a result of greater average milk yield per cow. In the same period, total milk production in Victoria and New South Wales declined by 15 per cent, Queensland (by 45 per cent) and South Australia (by 30 per cent) mainly because of a decline in total number of cows milked.

Figure 26 Total milk production, dairy farms, by state, 2000–01 to 2016–17
p Preliminary estimate.
Source: Dairy Australia

From 2000–01 to 2015–16 total milk production per farm trended upwards (Figure 27) as a result of an increased number of cows being milked and higher average milk yields. However, in 2016–17 milk production per farm fell by 1.3 per cent to 1.42 million litres per farm as a result of a decline in the milk yield per cow before rising by an estimated 3 per cent in 2017–18.

Figure 27 Milk production, dairy farms, Australia, 2000–01 to 2017–18
average per farm
p Preliminary estimate.
Source: ABARES Australian Dairy Industry Survey

Stocking rates

At the national level, average stocking rates per hectare operated for dairy farms was 20 per cent higher in 2016–17 than in 2000-01. The average stocking rate increased for all states except Victoria, where the rate decreased by 7 per cent (Figure 28).

Figure 28 Dairy cattle per hectare operated, dairy farms, by state, 2000–01 to 2016–17
average per farm
p Preliminary estimate.
Source: ABARES Australian Dairy Industry Survey

Milk yields

Advances in breeding and genetics have allowed dairy farmers to select cows for a range of traits, such as higher milk yield, longevity and reduced health problems. These developments contributed to milk yields per cow increasing at an annual average rate of 1.2 per cent a year from 2000–01 to 2016–17(Figure 29). However, research suggests the focus on breeding higher-yielding cows has affected cow fertility (Berry, Friggens, Lucy &Roche 2016). Fertility problems affect cow lactation and therefore farm productivity. In response, dairy farmers have adopted a variety of management practices to improve cow fertility, including artificial insemination, genetic selection, heat detection programs and transition diets.

Figure 29 Milk yield per cow, dairy farms, by state, 2000–01 to 2016–17
average per farm
p Preliminary estimate.
Source: ABARES Australian Dairy Industry Survey

Physical characteristics by scale of milk production

From 2000–01 to 2016–17 the number of farms milking fewer than 200 cows a year declined by around 71 per cent, largely accounting for the decline in the total number of farms. The number of farms milking between 200 and 350 cows initially fell but increased towards the end of the period as a number of small farms increased the size of their milking herds. The number of farms milking more than 350 cows remained relatively steady (Figure 30). Reflecting these changes, the average area operated by dairy farms increased by around 34 per cent from 2000–01 to 2016–17, reaching an estimated 313 hectares in 2016–17.

Figure 30 Number of Australian dairy farms, by herd size, 2000–01 to 2016–17
p Preliminary estimate.
Source: ABARES Australian Dairy Industry Survey

In 2016–17 milk production per farm decreased in all states except Queensland (Table 6). Milk production increased in Queensland as a result of increases in both the number of cows milked and milk yield per cow. In New South Wales increases in average milk yield per cow were partly offset by a decline in the number of cows milked. In South Australia and Western Australia increases in the number of cows milked were more than offset by a decline in average milk yield per cow. Milk production declined in Tasmania as a result of a decline in both the number of cows milked and milk yield per cow.

Table 6 Changes in milk production, dairy farms, by state, 2015–16 to 2016–17
average per farm
Region Cows milked (%) Milk yield per cow (%) Milk production (%)
New South Wales –4 1 –3
Victoria 2 –3 –1
Queensland 3 3 6
South Australia 7 –9 –3
Western Australia 8 –8 –1
Tasmania –3 –2 –5
Australia 1 –2 –1

Source: ABARES Australian Dairy Industry Survey

Seasonality of milk production

Dairy farmers plan their breeding programs in response to pasture growth and milk processor price incentives. The choice of calving pattern determines the seasonality of milk supply and demand for fodder. Common calving patterns are seasonal, year round and split.

On average, over the 5 years to 2017–18, 57 per cent of dairy farms used year-round calving, 25 per cent used seasonal calving and 17 per cent used split calving. Dairy farms using a split calving pattern produced larger milk volumes on average over the 5 years to 2016–17. Split calving results in more cows being milked and greater milk yield per cow than seasonal and year-round calving.

Use of these calving patterns varies across the states (Figure 31). Dairy farms in Queensland, New South Wales and Western Australia primarily use year-round calving to maintain a year-round supply of fresh milk to the domestic market. Dairy farms in other states use a mix of seasonal, year-round or split calving patterns. Dairy farms in Tasmania and Victoria mainly use a seasonal calving pattern.

Figure 31 Calving system, dairy farms, by state, 2012–13 to 2016–17
Source: ABARES Australian Dairy Industry Survey

Productivity

Agricultural productivity estimates are available for the dairy industry.

References

Berry, D.P, Friggens, N.C, Lucy, M & Roche, J.R 2016, Milk production and fertility in cattle, Annual Review of Animal Biosciences, vol. 4, pp 269-290.

Dairy Australia 2018, farm-facts, Dairy Australia, Victoria, accessed 08 June 2018.

Martin, P, Shafron, W & Phillips, P 2017, ‘Farm performance: broadacre and dairy farms, 2014–15 to 2016–17’, Agricultural commodities: March quarter 2017, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

Data and other resources

Broadacre and dairy industries data

AgSurf provides a large selection of ABARES farm survey data on the broadacre and dairy industries

Previous reports

Australian dairy: financial performance of dairy farms, 2015–16 to 2017–18

See our publications page for previous versions of the report Australian dairy: financial performance of dairy farms.

Farm surveys definitions and methods

Further information about our survey definitions and methods.

Farm performance: broadacre and dairy farms

This web report provides a detailed profile of the financial performance of farm businesses in the grains, livestock and dairy industries in the years 2016–17 to 2018–19.

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Last reviewed:
20 Jun 2019