Australia-The dairy crisis.

AUSTRALIA-THE DAIRY CRISIS.

The fall of 33pc in global dairy exports in the December quarter is hitting farmers hard, according to a report in The Australian Financial Review today, Friday.

A year ago milk prices were at record levels thanks to an unprecedented surge in global demand.

Dairy farmers, at least those with access to reliable water, had never had it so good, the article says.

Today, however, the industry is in crisis and farmers in Victoria, the main milk-producing state, are being forced off the land.

The change has punched holes in farmers’ projected cash flows and made a nonsense of investment and borrowing decisions based on July’s prices.

Add to that continuing drought in areas such as northern Victoria, and it is easy to see why many farmers are walking off the land.

"The whole of the Goulburn Valley is for sale," says rural real estate agent Kevin Hicks.

"We’ve got some very good farmers that love the job still, but they’re thinking to themselves that it’s too hard at the moment."

Hicks has 45 dairy farms on his books and blames zero water allocations, low milk prices and the high cost of feed.

However, Dairy Australia’s manager of strategy and knowledge, Joanne Bills, says farmers have strong hopes for the long-term future of the dairy industry.

"The prices we saw last year were phenomenal farm-gate prices, reflecting a perfect storm of international market conditions," she says.

"We were heading for a correction anyway, and the global financial crisis has swamped everything and given buyers an opportunity to put the brakes on prices.

"Buyers (of dairy products) are running down inventories, seeing what’s going to happen with consumers and very much buying on a hand to mouth basis until they feel confident about their consumer base or, more importantly, they feel supply pressure come on them."