And unless there’s an autumn break and global milk prices improve, it looks set to be a tough year.
Australian Standard White wheat delivered to Melbourne was $427 a tonne on Monday, compared to $261 a tonne at the same time last year, while feed barley was $395 a tonne, compared to $250 a tonne last year. Feed oats was $485 a tonne, up from $190 a tonne.
Large lucerne hay bales delivered Shepparton were making $505 a tonne on Monday, up from $240 a tonne in January last year, while large cereal hay was $315 a tonne, compared to $135 a tonne last year.
Dairy Australia senior industry analyst John Droppert said hay prices peaked in September, but were still well above average.
“Grain and fodder prices are adding significant pressure this year,” Mr Droppert said.
“Grain is about one-third of an average farm’s operating costs, so it’s added about $1/kg milk solids to cost of production,” he said.
Rabobank’s senior dairy analyst Michael Harvey said it would be a challenging year for profit because of “high feed bills”.
“Some regions have been able to grow some fodder, but we don’t expect it (feed cost) will improve this season,” Mr Harvey said.
To mitigate the high costs, Mr Harvey said some farmers had culled what they could and would adjust by culling further.
However, Mr Harvey said tightening global milk supply might result in some upside in milk prices in the first half of this year.
Australian Fodder Industry Association chief executive John McKew said fodder prices were still “quite high” with no “significant movements” in the past few months despite new-season supply coming on to the market.
“The supply chain was virtually empty and while the demand has eased slightly, there’s been no pressure to lower prices,” Mr McKew said.
Mr McKew said there was currently supply available but if there was no “substantial autumn break”, that might change.
Gippsland dairy consultant Matt Harms said cash-flow was tight on most farms.
Mr Harms said some farmers were offsetting the high grain price by feeding less.
“In some areas they are cutting back on grain by 1-3kg, which hasn’t cost much production at the moment,” he said. “Some are saying prices will stay high for the next 12 months, others say they could soften once we hit sowing if the season turns around.”