Take care when doing milk income estimates, says leading producer

Tyrendarra's Bruce Knowles said on the current base payments, "dairy farmers are definitely going to be struggling, in meeting the cost of production".

Dry seasonal conditions and demand were pushing up the price of feed, interest rates were high and inflation had seen the cost of all other inputs rise.an increase in other inputs.

"The pressure is on, all around, there is no doubt about that," Mr Knowles said.

It comes on the back of research by lobby group Dairy Farmers Victoria (DFV) showing the current prices stand to cost producers about $500 million this coming season.

DFV estimated the current opening milk price of $7.80-8.20 cents kilogram/Milk Solids would only allow farmers to "break even".

DFV president, Mark Billing, said he was concerned that could lead to a possible 3 percent drop in milk production.

"Given the opening price range, many of Victoria's dairy farmers will work for nothing in the coming season," he said.

"We understand that milk processors have been under pressure, but we believe there has been a gross over-correction to farm gate milk price".

Mr Knowles said the biggest impost was feed, brought about by dry conditions in the south-west.

"Going back a few months, I bought a reasonable amount of vetch, and from when I contracted it to two weeks later, it was up $60-70 a tonne," Mr Knowles said.

"I would imagine it is still on that upper trajectory."

It was time for farmers to take a "big deep breath" and think through budgets very carefully.

"There is plenty of expertise out there to help in that regard," he said.

"The signals are there - the processors are definitely playing a different game this year, to what they were the year before and farmers need to take note of that.

"I would like to think the processors are here for the long haul.

"They have got to look at their figures and likewise farmers need to have confidence in a future in the dairy industry and they have to do their figures."

"We just have to maintain confidence in the industry and do the sums."

Skye dairy farmer Sarah Kelly said her farm was being offered 8.20c/kg MS and she and her father were currently doing their estimates for the year to come.

"It's going to be pretty rough," Ms Kelly said.

Input costs were still high, "we sell everything at a wholesale price, but purchase everything at retail - I don't know any other businesses that have to run like that."

She said feed was the biggest cost.

"We are doing okay pasture-wise, but it hasn't gone as well as expected and we have had to buy in more feed," she said.

"We haven't had enough rain yet."

She said she'd like to see prices of around $9kg/MS.

She and her father Gerry would increase their herd and cut back on labour.

"That means more work for Dad and I," she said

"He's 65, he's still very fit, but it's hard on him - it takes its physical and mental toll, you have no space for anything else, because you are working all the time."

Mr Billing said it was "imperative" to restate farmgate milk prices were not exorbitant.

"Farmers, the backbone of this industry, deserve fair compensation for their toil and investments," he said.

He called for a more collaborative approach.

"By working together, farmers and processors can offer a more sustainable and balanced milk price environment," he said.

DFV believed the solution didn't lie in reducing farmgate milk prices to unsustainable levels, which would inevitably result in the loss of dairy farms and production capacity.

Instead the focus should be on creating resilient supply chains.

"This requires joint technological investments, improved production practices, and strategies to diversify product offerings better to meet global market demands," he said.

Establishing the mandatory Dairy Code of Conduct was a significant step towards ensuring transparency and fairness in the dairy industry.

"Government support in the form of research and development funding and trade policies can also play a pivotal role in stabilizing the industry."