Return on assets remain constant for dairy farms

Dairy-lamenessThe 2018 Dairy Farm Monitor Report has found that return on total assets has remained constant across Victoria on average, despite average profit being the fifth lowest in the 12-year history of the project.

Agriculture Victoria Farm Business Specialist Claire Waterman said the results reflect the challenging seasonal conditions, despite improved milk prices.

“Return on total assets (RoTA) remained constant at 2.5 per cent across the state on average, however, there is notable variation between the regions.

“Average profits remained comparable with the 2016-17 year with whole farm earnings before interest and tax (EBIT) decreasing to $159,000, compared with $167,000 reported in 2016-17.

“In 2017-18, 80 per cent of participants (60 of the 75 farms) recorded a positive RoTA, with a range of negative 5.3 to 10.6 per cent,” she said.

“While fewer farms recorded a positive result compared with the previous year (67 of the 75 farms), the range was narrower this year.”

“When interest and lease costs are considered, farm profits fell to their fifth lowest level in the project’s 12-year history at $49,000 as measured by net farm income and return on equity at 0.4 per cent.”

Ms Waterman said all Victorian dairying regions have had challenging seasonal conditions in 2017-18, with reduced rainfall compared to the previous year resulting in decreased home-grown feed as a percentage of ME consumed.

“Farms fed additional imported fodder, at generally higher prices, and utilised their feed reserves to manage the long, dry, hot summer. As a result, purchased feed and agistment costs increased by 16 per cent across the state, from $1.55/kg MS in 2016-17 up to $1.80/kg MS in 2017-18.”

She said while the season was challenging, milk price improved by 15 per cent on average to $5.81/kg MS, up from $5.07/kg MS and was the seventh highest price in the 12-year history of the project.

Ms Waterman said farmers’ expectations about their business returns for the 2018-19 season were cautious.

“While over two-thirds of farmers predict their business returns will improve, many participants were concerned about seasonal variability in the coming year. Input costs were the major issue identified for the coming 12 months, while milk price and climate variability were also identified as concerns over the longer term.”

The Dairy Farm Monitor Project provides farm level data relating to dairy profit and production in Victoria and was produced for the twelfth time this year. The project is a joint initiative between Agriculture Victoria and Dairy Australia.

UPCOMING SALES / EVENTS
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