Drought cuts deep as dairy profits collapse by 48 percent across western Victoria

Dairy farm profits in south west Victoria have fallen by 48 percent, marking the region’s lowest return since the 2018/19 milk season, as drought and high costs forced farmers to pull back on spending and lean on savings.

What happened: According to the 2024/25 Dairy Farm Monitor Project Report, South West Victoria’s average profit dropped to $1.26 per kilogram of milk solids, down from $2.40 the previous year. 

• The report found feed costs rose and drought conditions led to the lowest amount of directly grazed pasture in the project’s 19-year history for the region.

• Farmers have relied more heavily on purchased fodder to keep milk production steady during the last year.

What farmers are saying: Dixie dairy farmer Brad Collins said the downturn didn’t come as a surprise.

• “One hundred percent, the major factor is the weather,” he told the Brolga. “But then you also had a bit of a drop in milk price for that year too. So even though it’s risen a bit again now, the weather was the major driving factor. And the season just not quite going our way.”

Collins said the steep drop in profits meant many farmers had to borrow or dip into savings to stay afloat.

• “For a lot of businesses, that means that people would have to lean on equity to make sure that they can continue to pay bills,” he said. “So they would be going to the bank to borrow money, [I’m] not saying that’s everyone, but there’d be a majority, and others would be pulling money out of what they’ve put away.”

The impact locally: Recovery from the steep drop will take time and the impacts will likely be felt locally. 

• “The major thing is that you would have stopped doing capital improvements and projects, which means the flow-on effect of that means that the communities that we live in get affected,” said Collins.

• “Really, for the next 18 months, our communities that we live in are going to be majorly affected through that kind of drop, as farmers manage to get themselves back into where they’re comfortable again.”

The news on the drought: James Stuart, a hydrologist from Climate Resilience Australia, told the Brolga the last 24 months had been particularly harsh for western Victoria.

• “We have seen up to 600ml less rainfall than we might normally expect over that two-year period,” said Stuart.

• Stuart noted that while rainfall deficits had eased slightly in recent months, the situation remained severe.

A report by Environment Victoria explains the increase of persistent high-pressure systems over southern Australia is one of the “primary reasons” for reduced rainfall since February last year, caused in part as a consequence of mining and burning coal, oil and gas. 

Hoping for rain: Looking ahead, rainfall through to Christmas will be vital.

• More rain will mean farmers can store as much silage and hay as possible, keeping the cows milking for longer and cheaper. 

• Good planning, ongoing conversations with bankers, and talking to contractors to create plans will mean a steadier path forward.