3 financial performance, by state – dairy industry
average per farm
New South Wales
Victoria
2004-05
2005-06 p
2006-07 s
2004-05
2005-06 p
2006-07 s
total cash receipts
$
342 307
473 920
-4
422 000
358 028
399 860
-5
349 500
total cash costs
$
282 650
403 900
-6
419 700
267 719
307 980
-6
340 600
farm cash income
$
59 658
70 020
-22
2 300
90 308
91 880
-12
8 800
farms with negative farm cash income
%
13
20
-28
48
3
13
-32
54
farm business profit
$
729
–140
-11078
–103 000
29 306
25 170
-41
–86 100
farms with negative farm business profit
%
62
61
-9
75
36
47
-18
84
profit at full equity
– excl. capital appreciation
$
23 872
38 100
-40
– 67 900
65 134
67 710
-17
–43 000
– incl. capital appreciation
$
231 888
106 720
-78
na
146 691
111 340
-77
na
farm capital at 30 June a
$
2 905 215
3 758 600
-11
na
2 105 608
2 495 830
-5
na
net capital additions
$
40 826
45 130
-57
na
32 070
47 320
-41
na
farm debt at 30 June b
$
232 960
384 000
-15
427 300
346 271
430 910
-12
478 700
equity at 30 June b c
$
2 719 719
3 359 420
-12
na
1 699 122
2 057 710
-6
na
equity ratio b d
%
92
90
-2
na
83
83
-2
na
farm liquid assets at 30 June b
$
72 659
122 530
-17
na
91 351
71 780
-23
na
farm management deposits (FMDs)
at 30 June b
$
13 621
18 350
-38
na
9 535
10 530
-28
na
share of farms with FMDs at 30 June b
%
11
14
-33
na
20
14
-31
na
annual payment from DSAP and SDAS f
$
22 986
21 377
-33
na
11 266
12 393
-31
na
rate of return g
– excl. capital appreciation
%
0.9
1
-43
–1.8
3.3
2.8
-17
–1.7
– incl. capital appreciation
%
8.8
2.9
-83
na
7.4
4.7
-80
na
off-farm income of owner–manager
and spouse b
$
18 118
25 350
-38
na
24 660
22 100
-28
na
Queensland
Western Australia
2004-05
2005-06 p
2006-07 s
2004-05
2005-06 p
2006-07 s
total cash receipts
$
255 154
335 630
-5
342 600
432 692
521 610
-5
492 300
total cash costs
$
195 358
267 520
-7
296 000
360 040
407 900
-6
397 200
farm cash income
$
59 797
68 110
-20
46 600
72 652
113 710
-13
95 100
farms with negative farm cash income
%
12
18
-53
21
11
12
-43
25
farm business profit
$
–2 880
15 850
-86
–55 500
1 532
51 550
-31
5 800
farms with negative farm business profit
%
54
37
-30
80
58
25
-43
46
profit at full equity
– excl. capital appreciation
$
15 500
40 760
-32
–20 700
42 626
103 830
-15
64 100
– incl. capital appreciation
$
233 188
156 370
-47
na
306 633
1 474 420
-18
na
farm capital at 30 June a
$
2 206 962
2 643 650
-9
na
3 859 782
6 504 780
-7
na
net capital additions
$
3 191
41 340
-72
na
–29 752
59 250
-35
na
farm debt at 30 June b
$
231 739
370 620
-18
344 000
478 006
593 410
-10
688 200
equity at 30 June b c
$
2 004 486
2 261 430
-11
na
3 348 700
5 900 490
-8
na
equity ratio b d
%
90
86
-4
na
88
91
-1
na
farm liquid assets at 30 June b
$
54 648
71 830
-30
na
47 602
129 340
-39
na
farm management deposits (FMDs)
at 30 June b
$
11 710
11 780
-62
na
14 242
24 650
-65
na
share of farms with FMDs at 30 June b
%
12
12
-52
na
11
14
-55
na
annual payment from DSAP and SDAS f
$
22 880
24 253
-52
na
32 721
31 412
-55
na
rate of return g
– excl. capital appreciation
%
0.8
1.7
-30
–0.7
1.2
2.1
-16
1
– incl. capital appreciation
%
11.8
6.4
-46
na
8.5
29.1
-23
na
off-farm income of owner-manager
and spouse b
$
23 945
23 770
-38
na
14 218
13 730
-28
na
South Australia
Tasmania
2004-05
2005-06 p
2006-07 s
2004-05
2005-06 p
2006-07 s
total cash receipts
$
471 003
558 960
-6
580 200
402 119
451 000
-3
450 700
total cash costs
$
385 181
505 390
-5
574 400
343 413
360 090
-4
372 800
farm cash income
$
85 822
53 570
-47
5 700
58 706
90 910
-9
77 900
farms with negative farm cash income
%
5
23
-54
33
15
16
-21
12
farm business profit
$
19 482
–22 730
-151
–120 000
17 425
12 260
-39
–4 900
farms with negative farm business profit
%
38
50
-23
55
48
62
-12
52
profit at full equity
– excl. capital appreciation
$
54 555
28 510
-112
–67 800
69 597
60 990
-13
47 200
– incl. capital appreciation
$
154 431
115 640
-33
na
374 413
644 340
-35
na
farm capital at 1 July a
$
2 494 506
2 848 180
-6
na
2 478 489
3 300 130
-4
na
net capital additions
$
84 368
61 750
-32
na
28 527
54 900
-28
na
farm debt at 30 June b
$
360 153
571 020
-12
679 600
548 791
563 070
-8
752 900
equity at 30 June b c
$
2 141 793
2 270 520
-8
na
1 908 934
2 731 080
-4
na
equity ratio b d
%
86
80
-3
na
78
83
-1
na
farm liquid assets at 30 June b
$
66 397
108 620
-50
na
20 213
28 930
-15
na
farm management deposits (FMDs)
at 30 June b
$
8 327
7 380
-58
na
3 670
9 740
-20
na
share of farms with FMDs at 30 June b
%
22
14
-59
na
12
11
-22
na
annual payment from DSAP and SDAS f
$
21 116
20 483
-59
na
13 664
14 074
-22
na
rate of return g
– excl. capital appreciation
%
2.4
1.1
-109
–2.1
3.3
2.3
-13
1.5
– incl. capital appreciation
%
6.7
4.3
-32
na
17.9
24.4
-36
na
off-farm income of owner–manager
and spouse b
$
6 751
12 320
-38
na
8 199
12 410
-28
na
Australia
2004–05
2005–06 p
2006–07 s
total cash receipts
$
355 390
416 270
-6
377 800
total cash costs
$
275 002
330 240
-5
360 000
farm cash income
$
80 388
86 030
-47
17 800
farms with negative farm cash income
%
6
15
-54
46
farm business profit
$
19 967
19 260
-151
–79 500
farms with negative farm business profit
%
43
48
-23
78
profit at full equity
– excl. capital appreciation
$
53 213
60 750
-112
–36 700
– incl. capital appreciation
$
185 222
185 220
-33
na
farm capital at 30 June a
$
2 321 718
2 830 280
-6
na
net capital additions
$
30 693
47 990
-32
na
farm debt at 30 June b
$
334 588
439 020
-12
491 000
equity at 30 June b c
$
1 961 237
2 382 740
-8
na
equity ratio b d
%
85
84
-3
na
farm liquid assets at 30 June b
$
77 517
78 470
-50
na
farm management deposits (FMDs)
at 30 June b
$
10 125
11 740
-58
na
share of farms with FMDs at 30 June b
%
17
14
-59
na
annual payment from DSAP and SDAS f
$
15 634
15 321
-59
na
rate of return g
– excl. capital appreciation
%
2.5
2.3
-109
–1.3
– incl. capital appreciation
%
8.6
7
-32
na
off-farm income of owner–manager
and spouse b
$
21 656
21 360
-38
na
a Excludes leased plant and equipment. b Average per responding farm. c Farm capital minus farm debt. d Equity expressed as a percentage of farm capital.
e Harvest loans are not included in farm debt. f Dairy Structural Adjustment Program and Supplementary Dairy Assistance Scheme. g Rate of return to farm capital at 1 July. p Preliminary estimates. s Provisional estimates. na Not available.
Farm cash income is also projected to be sharply lower in the Northern Territory, primarily reflecting increases in transfers onto Northern Territory properties compared with the previous year, while transfers off and sales remained relatively unchanged.
Average incomes in Western Australia are projected to increase in 2006-07 to just over $120 000 per farm. Western Australian winter crop production in 2006 was less affected by below average seasonal conditions, although this was not uniform across the state. Grain producers in the northern parts of the cropping zone were particularly affected by the dry season and are expected to record poorer farm performance than their counterparts elsewhere in the state.
However, at the state level, carryover payments from the previous year’s winter crop helped maintain crop receipts. The major factor behind the rise in farm cash income was a lift in receipts from cattle sales. However, higher cattle sales led to a reduction in herd numbers which, in turn, is reflected in the drop in farm business profit.
The average farm cash income for dairy farmers in Victoria, New South Wales and South Australia is projected to fall considerably in 2006-07, with receipts barely sufficient to cover cash costs (table 3). The higher cost of fodder, caused by reduced pasture availability and much higher fodder prices, was a major factor affecting the financial performance of farms in these states. This was further compounded by lower milk production and sales.
performance, by industry
Summary information on financial performance in Australian broadacre and dairy industries is given in table 4 and figures B and C, while detailed estimates are provided in table 5. For the purposes of survey design, analysis and data presentation ABARE uses the Australian and New Zealand Standard Industrial Classification of industry type or ANZSIC. Many Australian broadacre farms are mixed enterprises combining grain growing, sheep or beef cattle. The following discussion of grains, sheep, beef and dairy farms uses information for broadacre ANZSIC industry types substantially involved in the production of these commodities.
grain farms
Farm cash income for grain producers in the wheat and other crops and mixed livestock–crops industry increased modestly in 2005-06 to where it could be considered to be among the better income years in the past three decades. Substantial increases in grain production bolstered receipts even though grain prices were slightly lower. Receipts on mixed livestock–crops farms were also boosted by higher receipts from beef cattle and lambs. Farm costs rose because of the higher costs associated with the production, harvest and marketing of the large 2005 winter crop. Farm expenditures on fuel, fertiliser, and grain handling were all higher. Average interest payments also rose as many grain farms increased borrowings to finance new investments in plant and machinery.
4 financial performance of broadacre farms, by industry
average per farm
farm cash income
farm business profit
2004-05
2005-06
p
2006-07
s
2004-05
2005-06
p
2006-07
$
$
$
$
$
$
wheat and other crops
115 860
140 560
7 100
22 710
54 980
–112 300
mixed livestock–crops
66 750
74 490
25 200
–7 700
–200
–62 500
beef industry
72 740
82 100
41 900
20 490
8 400
–40 500
– farms with less than 300 beef cattle
29 943
21 518
12 192
–38 046
–34 439
–45 896
– farms with more than 300 beef cattle
92 437
115 194
57 784
47 551
31 756
–37 535
sheep
29 370
39 390
27 800
–26 570
–17 340
–50 100
– farms with less than 3000 sheep
9 917
24 615
15 248
–46 536
–23 420
–53 684
– farms with more than 3000 sheep
63 771
62 726
47 531
9 448
–7 737
–44 339
sheep–beef
72 070
63 240
23 400
1 370
–6 830
–29 400
all broadacre industries
72 790
81 290
26 600
3 690
8 620
–59 800
dairy
17 840
86 030
17 800
19 970
19 260
–79 500
rate of return – excluding capital appreciation a
rate of return – including capital appreciation a
2004-05
2005-06 p
2006-07 s
2004-05
2005-06 p
%
%
%
%
%
wheat and other crops
2.2
3.2
–1.4
8
5.5
mixed livestock–crops
0.8
1
–0.9
7
5.4
beef industry
1.3
1
–0.2
9.7
10.8
– farms with less than 300 beef cattle
–2.2
–1.4
–1.9
10.5
10.9
– farms with more than 300 beef cattle
1.9
1.5
0.2
9.6
10.8
sheep
–0.3
0.4
–1.0
6.8
4.8
– farms with less than 3000 sheep
–2.2
–0.4
–2.1
7.4
4.2
– farms with more than 3000 sheep
1.2
0.9
–0.2
6.4
5.2
sheep–beef
0.7
0.5
0
5.1
7.6
all broadacre industries
1.1
1.3
–0.6
7.8
7.3
dairy
2.5
2.3
–1.3
8.6
7
a Defined as profit at full equity, including or excluding capital appreciation, as a percentage of total opening capital. Profit at full equity is defined as farm business profit plus rent, interest and lease payments less depreciation on leased items. p Preliminary. s Provisional estimate.
5 financial performance, by industry
average per farm
wheat and other crop industry
mixed livestock–crops industry
2004-05
2005-06 p
2006-07 s
2004-05
2005-06 p
2006-07 s
total cash receipts
$
492 513
576 937
-8
399 586
323 515
334 322
-7
258 409
total cash costs
$
376 657
436 373
-7
392 486
256 761
259 832
-6
233 229
farm cash income
$
115 856
140 563
-15
7 100
66 754
74 490
-16
25 180
farms with negative farm cash income
%
27
19
-16
52
25
18
-14
54
farm business profit
$
22 707
54 979
-31
–112 349
–7 696
–201
-124
–62 454
farms with negative farm business profit
%
59
41
-11
77
60
61
-6
77
profit at full equity
– excl. capital appreciation
$
67 093
108 429
-17
–50 191
21 726
30 208
-44
–26 562
– incl. capital appreciation
$
243 069
185 854
-14
na
180 459
156 080
-16
na
farm capital at 30 June a
$
3 300 532
3 561 133
-6
na
2 767 794
3 041 243
-6
na
net capital additions
$
73 870
89 376
-24
na
36 404
24 374
-57
na
farm debt at 30 June b
$
491 716
575 208
-9
666 060
333 271
350 924
-12
402 858
equity at 30 June b c
$
2 634 236
2 960 258
-6
na
2 394 395
2 673 530
-6
na
equity ratio b d
%
84
84
-1
na
88
88
-1
na
harvest loans at 30 June e
$
41 168
44 904
-15
na
8 334
12 453
-24
na
farm liquid assets at 30 June b
$
167 859
172 125
-11
na
106 397
111 528
-10
na
farm management deposits (FMDs)
at 30 June b
$
46 665
39 206
-15
na
21 887
20 807
-14
na
share of farms with FMDs at 30 June b
%
30
25
-13
na
24
21
-13
na
rate of return f
– excl. capital appreciation
%
2.2
3.2
-14
–1.4
0.8
1
-42
–0.9
– incl. capital appreciation
%
8
5.5
-11
na
7
5.4
-14
na
off–farm income of owner–manager
and spouse b
$
23 892
28 030
-11
na
27 307
32 555
-13
na
sheep industry
beef industry
2004-05
2005-06 p
2006-07 s
2004-05
2005-06 p
2006-07 s
total cash receipts
$
200 769
228 016
-7
194 442
500 255
347 428
-40
322 394
total cash costs
$
171 396
188 627
-7
166 673
427 513
265 323
-41
280 542
farm cash income
$
29 373
39 390
-19
27 769
72 741
82 104
-39
41 852
farms with negative farm cash income
%
37
29
-17
30
25
27
-15
39
farm business profit
$
–26 565
–17 340
-47
–50 059
20 486
8 401
-139
–40 457
farms with negative farm business profit
%
72
63
-8
78
57
61
-8
74
profit at full equity
– excl. capital appreciation
$
–6 804
8 962
-79
– 25 722
44 660
37 511
-65
–6 572
– incl. capital appreciation
$
155 233
121 667
-19
na
324 742
390 902
-14
na
farm capital at 30 June a
$
2 417 288
2 633 441
-6
na
3 687 655
3 994 994
-5
na
net capital additions
$
–3 715
–12 830
-353
na
59 523
30 997
-131
na
farm debt at 30 June b
$
200 743
259 224
-15
257 029
285 711
308 059
-12
369 775
equity at 30 June b c
$
2 138 887
2 367 642
-5
na
3 245 099
3 675 218
-5
na
equity ratio b d
%
91
90
-1
na
92
92
-1
na
harvest loans at 30 June e
$
594
819
-69
na
102
262
-85
na
farm liquid assets at 30 June b
$
96 517
101 764
-15
na
124 293
159 968
-12
na
farm management deposits (FMDs)
at 30 June b
$
20 083
14 556
-19
na
24 148
15 930
-16
na
share of farms with FMDs at 30 June b
%
25
17
-17
na
21
16
-15
na
rate of return f
– excl. capital appreciation
%
–0.3
0.4
-79
–1.0
1.3
1
-62
–0.2
– incl. capital appreciation
%
6.8
4.8
-21
na
9.7
10.8
-13
na
off–farm income of owner–manager
and spouse b
$
28 661
29 963
-15
na
29 877
34 384
-35
na
sheep–beef industry
dairy industry
2004-05
2005-06 p
2006-07 s
2004-05
2005-06 p
2006-07 s
total cash receipts
$
301 038
289 527
-32
245 265
355 390
416 268
-3
377 798
total cash costs
$
228 969
226 286
-26
221 896
275 002
330 236
-4
359 957
farm cash income
$
72 069
63 241
-61
23 369
80 388
86 032
-9
17 840
farms with negative farm cash income
%
26
21
-22
47
6
15
-21
46
farm business profit
$
1 369
–6 825
-384
–29 368
19 967
19 259
-39
–79 476
farms with negative farm business profit
%
56
64
-8
79
43
48
-12
78
profit at full equity
– excl. capital appreciation
$
22 174
17 183
-154
1 545
53 213
60 748
-13
–36 695
– incl. capital appreciation
$
167 743
281 876
-55
na
185 222
185 221
-35
na
farm capital at 30 June a
$
3 478 213
3 957 508
-23
na
2 321 718
2 830 275
-4
na
net capital additions
$
72 327
–3 790
-3757
na
30 693
47 990
-28
na
farm debt at 30 June b
$
247 768
285 620
-14
369 539
334 588
439 016
-8
491 014
equity at 30 June b c
$
3 070 306
3 663 476
-25
na
1 961 237
2 382 744
-4
na
equity ratio b d
%
93
93
-2
na
85
84
-1
na
harvest loans at 30 June e
$
97
0
0
na
0
0
0
na
farm liquid assets at 30 June b
$
106 251
116 923
-18
na
77 517
78 467
-15
na
farm management deposits (FMDs)
at 30 June b
$
19 273
15 237
-43
na
10 125
11 739
-20
na
share of farms with FMDs at 30 June b
%
22
19
-14
na
17
14
-22
na
rate of return f
– excl. capital appreciation
%
0.7
0.5
-140
0
2.5
2.3
-13
–1.3
– incl. capital appreciation
%
5.1
7.6
-42
na
8.6
7
-36
na
off–farm income of owner–manager
and spouse b
$
28 729
27 936
-13
na
22 903
19 345
-16
na
a Excludes leased plant and equipment. b Average per responding farm. c Farm capital minus farm debt. d Equity expressed as a percentage of farm capital.
e Harvest loans are not included in farm debt. f Rate of return to farm capital at 1 July. p Preliminary estimates. s Provisional estimates. na Not available.
The effect on financial performance of the widespread crop failures in 2006-07 has been concentrated on grain farms, particularly cropping specialists. Farm cash income is expected to drop sharply for grain producers, with reductions in crop receipts the major cause. Two factors served to limit the reduction in receipts. First, grain prices have risen sharply from the previous year, providing a healthy return for what little grain was harvested. Second, there were substantial payments for the previous year’s large crop that were received in 2006-07. The reduction in farm receipts is projected to be amplified on mixed livestock–crops farms by lower lamb and beef prices, and by the sale of less than finished stock due to drought conditions.
With average cash costs only projected to be around 10 per cent lower than in the previous year, the average farm cash income for both wheat and other crops and mixed livestock–crops industry farms are projected to fall to the lowest level in the past three decades (figure B). Farm business profits are also projected to be drastically reduced. The reduction in profit is projected to be greater than the reduction in farm cash income mostly because of a reduction in on-farm inventories of grain and livestock. Just over 50 per cent of grains farms are projected to record negative farm cash incomes in 2006-07 and average farm debt is expected to increase by around 15 per cent. Almost all of the increase in debt in 2006-07 is expected to be for working capital.
On the positive side, one of the major reasons for the low farm cash income is the relatively high level of farm expenditure anticipated for the planting of the forthcoming 2007 winter crop. Projected total cash costs for 2006-07 include a large part of the anticipated cost of planting the next crop and producers have indicated that they intend to significantly expand winter crop area in 2007 if autumn rainfall is favourable. Further, the high level of new investment on grain farms in recent years in new plant and machinery should assist grain farm to increase output and productivity when seasonal conditions improve.
sheep farms
In 2005-06, sheep industry farm cash incomes increased by 20 per cent on the back of higher receipts from crops and, to a lesser extent, lambs and sheep. This result was achieved despite a reduction in wool production and wool prices. Farm cash income for sheep–beef industry farms in 2005-06 was slightly lower than the previous year as higher beef receipts offset reductions in income from sales of sheep, lambs, wool and crops. However, farm cash income above $60 000 is historically high when compared with incomes since the beginning of the 1990s.
In 2006-07, farm cash income is projected to fall sharply for sheep–beef industry farms as prices for wool, sheep, lambs and beef cattle are all forecast to weaken. Fodder costs for these farms are also expected to rise significantly. For sheep–beef industry farms, particularly in northern New South Wales and larger pastoral properties in Queensland and Western Australia, average turnoff of sheep and cattle is expected to be lower in 2006-07. This will also act to reduce farm receipts from the previous year’s level but lead to a lesser reduction in farm business profit as livestock numbers increase slightly after several years of high turnoff.
The fall in average farm cash income on sheep industry farms in 2006-07 is projected to be smaller than for the sheep–beef industry. Turnoff of sheep is expected to be up as producers reduce stock numbers in the light of reduced pasture availability. However, with lower sheep and lamb prices and the poorer average condition of stock, sheep receipts are nonetheless expected to fall. Receipts from wool are expected to be slightly down on the previous year with higher prices only partly offsetting lower production. A substantial increase in the average expenditure on fodder is projected to limit the extent to which sheep producers reduce cash costs.
beef farms
Average beef cattle turnoff fell slightly on beef industry farms in 2005-06, although the reduction in turnoff was more marked in pastoral Queensland where herds were being rebuilt. The reduction in cattle turnoff on beef industry farms was a major factor that reduced their total cash receipts in 2005-06 along with lower average crop receipts. However, total farm cash costs also fell significantly in 2005-06 because of a large reduction in purchases of store and breeding stock and reduced fodder expenditure. This more than offset the reduction in receipts and farm cash incomes rose slightly to average $82 000 per farm. In real terms, this was similar to the other historical highs observed in 1979-80 and more recently in 2001-02 (figure B). Farm business profit was also above average in 2005-06.
In 2006-07, net sales of beef cattle are expected to rise in all states other than Queensland and the Northern Territory. This mostly reflects the extremely dry conditions in southern Australia that have restricted pasture availability. However, in northern Australia, seasonal conditions are relatively much better and producers are intending to continue herd rebuilding by limiting the number of cattle sold. Overall, beef cattle sales by beef industry specialists are projected to be slightly higher in 2006-07 than in the previous year, although slightly lower prices are expected to lead to lower beef cattle receipts.
While receipts are projected to be around 10 per cent lower in 2006-07, farm cash costs are projected to rise slightly above the previous year’s level. Cattle purchases are expected to fall further as producers either endeavour to rebuild herds through natural increase or limit purchases to manage the reduced feed availability depending on their local seasonal conditions. However, the lower cost of livestock purchases is expected to be almost entirely offset by higher fodder costs. Lower receipts and unchanged cash costs are projected to result in average farm cash incomes in the beef industry roughly halving to just above $40 000 per farm in 2006-07.
dairy industry
The Australian dairy industry has undergone a number of large production and market related shocks in recent years. These include severe drought, low allocations of irrigation water in the Goulburn and Murray Valley production regions and highly volatile world market returns between 2001 and 2003. These shocks have had a major influence on farm production and financial performance in the four years to 2005-06. Average farm cash incomes in the dairy industry recovered in both 2003-04 and 2004-05 from the low recorded in the drought affected year of 2002-03. In 2004-05 in particular, higher production and higher prices contributed to a marked improvement in the average financial performance of Australian dairy farms.
The same factors further boosted average farm cash income in 2005-06. The higher production was particularly notable in that it was achieved despite a deterioration of seasonal conditions in the second half of the year. The strong increase in receipts was more than sufficient to offset the higher cost of fertiliser, fodder and interest payments in 2005-06 and average farm cash income rose to around $86 000 per farm, which over the past three decades was second only in real terms to the record incomes in 2001-02 (figure C).
In 2006-07, many dairying regions have been significantly affected by drought and significantly lower availability of irrigation water. This has resulted in reduced pasture production and has driven fodder costs higher. Dairy farm expenditure on fodder is projected to average more than $130 000 per farm in 2006-07, which is around 25 per cent higher in real terms than in 2002-03 when drought conditions were also severe. Anticipation of continued drought conditions has led many dairy farms to dry off cows early and reduce herd numbers to contain farm costs.
Reductions in average milk production of around 10 per cent in combination with slightly lower milk prices are projected to result in a sharp decline in dairy farm receipts in 2006-07. With lower farm receipts and higher cash costs, farm cash incomes are projected to fall markedly to below $18 000 per farm. The reduction in dairy herd numbers and the rundown in on-farm stocks of fodder and grain are projected to lead to farm business profit falling by even more than farm cash income.
