WA dairy farmers “creamed” their Eastern States counterparts from a business perspective so attendees at Western Dairy’s spring field day recently were told.
Western Dairy’s agribusiness team leader Kirk Reynolds presented the latest 2016-17 data from Dairy Australia’s Dairy Farm Monitor project which analyses detailed financial and production information provided by participating dairy farms across Australia.
In the four years the project has run in WA 40 dairy farms have participated and for 2016-17 there were 27 involved – 15 irrigated, 12 dryland and nine of them rotating into the program – which represented 26 per cent of the State’s milk volume, Mr Reynolds said.
The national data set was so recent that latest figures for Tasmania and Queensland had yet to be added but he said it still gave an accurate view of how WA dairy farm businesses compared to the Eastern States.
“The highlight for me this year is where we sit, on business measures we have creamed the other States again,” Mr Reynolds said.
The data showed WA dairy farms in the project had a return on assets (ROA) of 6.9pc compared to a maximum of 3.1pc for New South Wales, South Australia and Victoria.
They had a return on expenditure (ROE) of 18.8pc compared to a maximum of 2.1pc for the other three States.
Earnings before interest and tax (EBIT) in WA were $2.09 per kilogram of milk solids (the measure used in the Eastern States for milk payments rather than cents per litre used in WA), compared to 92c in NSW, 88c in SA and 75c in Victoria.
“It’s (data set) a good thing for those people who have invested in WA dairy,” Mr Reynolds said.
“On-farm working expenses we sit middle of the road, not as low as the Victorians and I assume when the Tassie data comes in we won’t be as low as them either because they normally mirror the Victorians.
“But (our farm expenses) were significantly lower than NSW and slightly lower than SA.
“Purchased feed (at $1.98 per kilogram of milk solids) is the highest cost level (only 1c above NSW but 43c more than in Victoria and 57c more than in South Australia).
“You have to be mindful of how you are using purchased feed – you have to be sure you are making a dollar out of it, otherwise you are just milking for love.
“A higher cost of production is not necessarily a bad thing, it’s all about managing that margin, the bit you get to take home.
“We always talk about milk price but you can’t control that.
“What you can control is your costs and your resources and driving the financials.
“As a dairy farmer you’ve got a set of resources to manage as best you can and understand how those resources drive your dollar,” Mr Reynolds said.
On the local data, he said it continued to show there was no relationship between herd size and return on assets.
“It’s all about the management,” Mr Reynolds said.
“The difference between the top 25pc and the rest continues to be their use of resources, they drive more milk out of every usable hectare, they consume more pasture and more of that is actually grazed, and they conserve better quality fodder.
“They tightly control core costs – labour, depreciation and finance costs.
“The take-home message from this data is know your own numbers – that’s the power of this data.
“Effective management of resources is what it’s about whether you’re a dryland farmer or an irrigated farmer, whether you have three staff or 10.”
The 27 farms in the 2016-17 WA data set were located from Waroona to Denmark, ranging in size from 170 cows to 1600 cows.
Stocking rates ranged from 0.5-1.7 cows per usable hectare, litres of milk produced ranged from 3736-13,774/ha, up to four tonnes of grain per cow were fed a year, up to 3.2t of silage a year and home-grown feed ranged from 50-100pc.
Their average farmgate milk price dropped about a cent per litre to 51.3 cents per litre but the spread of prices was, Mr Reynolds said, “quite significant” at 44.6-58.7cpl.
Average total farm earnings of 59.2cpl were back below 2014-15 level with both milk price and income from other sources down on last season.