Financial performance of

dairy farms
2020–21 to 2022–23
Research by the Australian Bureau of Agricultural and Resource Economics and Sciences
June 2023

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 Financial performance of dairy farms, 2020–21 to 2022–23

© Commonwealth of Australia 2023

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This publication (and any material sourced from it) should be attributed as: ABARES 2023, Financial performance of dairy
farms: 2020–21 to 2022–23, ABARES, Canberra, June, DOI: https://doi.org/10.25814/6kr7-m653. CC BY 4.0.

ISSN 2653-1275

Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)

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Acknowledgements

ABARES relies on the voluntary cooperation of farmers participating in the annual Australian Agricultural and Grazing
Industries Survey (AAGIS) and Australian Dairy Industry Survey (ADIS) to provide data used in the preparation of this report.
Without their help, the survey would not be possible. ABARES farm survey staff collected most of the information
presented in this report through on-farm interviews with farmers. AAGIS is funded by the Department of Agriculture,
Fisheries and Forestry, Meat & Livestock Australia (MLA) and the Grains Research and Development Corporation (GRDC).
ADIS is funded by the Department of Agriculture, Fisheries and Forestry.

Acknowledgement of Country

We acknowledge the Traditional Custodians of Australia and their continuing connection to land and sea, waters,
environment and community. We pay our respects to the Traditional Custodians of the lands we live and work on, their
culture, and their Elders past and present.

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 Financial performance of dairy farms, 2020–21 to 2022–23

Contents
Strong financial performance in 2022-23 ........................................................................................1
Key points ........................................................................................................................................ 1
Farm cash income .........................................................................................................................3
Performance by state ...................................................................................................................... 4
Farm capital and farm debt............................................................................................................8
Debt servicing .................................................................................................................................. 9
Liquid assets and non-farm income............................................................................................... 10
References .................................................................................................................................. 14

Figures
Figure 1 Farm cash incomes, dairy farms, Australia, 2010–11 to 2022–23 ............................................ 3
Figure 2 State shares of Australian milk production, 2021–22 ............................................................... 4
Figure 3 Annual milk production per farm, by state, 2021–22 ............................................................... 5
Figure 4 Farm capital value and closing dairy herd, Australia, 2000–01 to 2021–22 ............................. 8
Figure 5 Farm business debt and farm equity ratio, dairy farms, Australia, 2000–01 to 2021–22 ........ 9
Figure 6 Interest coverage ratio, dairy farms, Australia, 2000–01 to 2021–22 .................................... 10
Figure 7 Ratio of farm liquid assets to total cash receipts, dairy farms, Australia, 2000–01 to 2021–22
............................................................................................................................................................... 11
Figure 8 Farm household income and liquid assets by farm size, dairy farms, Australia, 2000–01 to
2021–22 ................................................................................................................................................. 12

Maps
Map 1 Australian dairy regions ............................................................................................................. 13

Boxes
Box 1 Financial values adjusted for inflation........................................................................................... 2
Box 2 ABARES farm survey industry definitions .................................................................................... 13

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 Financial performance of dairy farms, 2020–21 to 2022–23

Strong dairy farm financial

performance in 2022–23
Key points
• The average farm cash income across all dairy farms in Australia in 2022–23 is projected to be
$361,000 per farm – an increase of 10% on the previous year, and a record high for the industry
in real terms (see Box 1). The average rate of return to capital is projected to be 3.6% in 2022-23,
compared with 3.7% in 2021-22.

• There is wide variability across farms, with the top 20% of dairy farms projected to earn an
average farm cash income of $1.17 million per farm in 2022–23, at an average rate of return of
around 7%. This group of farms is estimated to account for 48% of dairy industry output
(turnover) in 2022–23.

• The bottom 20% of farms are projected to earn an average farm cash income of negative
$66,000 per farm in 2022–23, at an average rate of return of -0.9%. This group of farms is
estimated to account for 12% of industry turnover in 2022-23.

• The increase in average farm cash income in 2022–23 follows year-on-year increases in 2020–21
and 2021–22.

• Average farm cash incomes in all states are now considerably higher in real terms than their
corresponding longer term (10 year) averages.

• While milk prices are at record levels, seasonal conditions during 2022–23 have not been ideal in
many dairy farming regions, particularly in eastern Australia where excessively wet conditions
hampered grazing and fodder production systems. As a result, milk production per farm is
expected to be lower in most states in 2022–23. However, the positive effect of higher milk
prices is expected to outweigh the negative effect of a drop in milk production per farm.

• Supplementary fodder, a major cost item for many dairy farmers, is expected to increase by
around 8% in 2022–23 to an average of $332,100 per farm as a result of higher prices for feed
grains.

• Higher market interest rates are expected to result in dairy farm interest costs averaging $89,300
per farm in 2022–23, an increase of 120% on the previous year. The impacts of higher interest
rates vary from farm to farm, depending on debt holdings.

• At 30 June 2022, one-third of dairy farms had a total debt of less than $300,000 per farm, with
many of these farms holding little to no debt. Another one-third of dairy farms had debts
between $300,000 and $1.3 million per farm, and the remaining one-third of farms had debt of
$1.3 million or more. For these farms, recent increases in interest rates are expected to have a
material impact on total farm costs in 2022–23.

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 Financial performance of dairy farms, 2020–21 to 2022–23

Box 1 Financial values adjusted for inflation

All dollar values in this industry report are reported in real terms, adjusted to 2022–23 values.
Adjusting to real terms removes the effect of inflation and allows financial values of different time
periods to be compared in like terms.
ABARES adjusts for inflation using the consumer price index, supplied by the Australian Bureau of
Statistics (Australian Bureau of Statistics, 2023).

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 Financial performance of dairy farms, 2020–21 to 2022–23

Farm cash income

At the national level, the average farm cash income of dairy farms increased by 18% in 2021–22 to
$327,700 per farm. In 2022–23 average farm cash income is projected to increase by a further 10% to
$361,000 per farm.

Other measures of farm profitability, such as average profit at full equity and the average rate of
return to capital, also improved in 2021–22, and are expected to either improve further or remain
largely unchanged in 2022–23. For example, the average rate of return to capital (excluding capital
appreciation) increased from 3.2% in 2020–21 to 3.8% in 2021–22, and is projected to be 3.6% in
2022–23. The average rate of return is projected to decline in 2021–22 because of a smaller buildup
in trading stocks than the previous year and a proportionally larger increase in the total value of farm
capital because of rising land values.

The broad improvement in the profitability of dairy farming recently is a welcome development for
an industry that endured difficult seasonal and market conditions in much of the preceding decade.

At the national level, average farm cash incomes in each of the last four years (including our
projection of average farm cash income in 2022–23) have been above the 10-year average to 2021–
22 ($185,300 in real terms). Moreover, average farm cash incomes in both 2021–22 and 2022–23 are
around double the longer term average (Figure 1).

Figure 1 Farm cash incomes, dairy farms, Australia, 2010–11 to 2022–23

average per farm
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
2022–23$

Farm cash income Average (10 years)

Notes: p Preliminary. y Projection.

Farm cash income varies over time because of short-term changes in factors such as commodity prices, seasonal conditions
and management decisions, as well as longer-term changes in the farm sector, such as growth in average farm size, shifts in
enterprise mix and technological progress. Appropriate consideration of the long-term factors is essential when interpreting
changes in farm cash income over periods longer than 3 to 5 years.
Source: ABARES Australian Dairy Industry Survey

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 Financial performance of dairy farms, 2020–21 to 2022–23

Performance by state
Victoria
The majority (62%) of Australia’s dairy farms are in Victoria and collectively produce the vast majority
of Australia’s milk (64% in 2021–22). In terms of milk production per farm, Victorian dairy farms are
larger than dairy farms in Queensland, but smaller, on average, than those in all other states (Figure
2 and Figure 3).

Figure 2 State shares of Australian milk production, 2021–22

Source: Dairy Australia 2022a

In 2021–22, higher milk prices at the farm-gate and an increase in the average quantity of milk
produced per farm helped drive a 24% increase in average farm cash income in Victoria.

In 2022–23, aggregate milk production in Victoria is expected to fall around 7%, while farm-gate milk
prices are expected to be considerably higher (up around 20%). While some costs are projected to
increase – notably feed costs and interest expenses – the average level of farm cash income in
Victoria in 2022–23 is projected to be $343,000 per farm – an increase of 7% over the previous year
and well above the 10-year average to 2021–22 of $169,000 per farm.

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 Financial performance of dairy farms, 2020–21 to 2022–23

Figure 3 Annual milk production per farm, by state, 2021–22

average per farm

South Australia 2.46

Western Australia 2.39

Tasmania 2.28

New South Wales 1.97

Victoria 1.75

Queensland 0.93

millions of litres 0.5 1.0 1.5 2.0 2.5 3.0

Source: ABARES Australian Dairy Industry Survey

New South Wales

New South Wales is the second largest milk-producing state, and currently accounts for 12% of
national milk production. In 2021–22 the profitability of dairy farms in New South Wales improved
substantially, driven by higher milk production per farm and higher farm-gate milk prices. The
average farm cash income in 2021–22 was $368,300 per farm – an increase of 31% compared with
the previous year, and well above the 10-year average to 2021–22 of $207,800 per farm.

Excessive rain and flooding events earlier in the year are putting a brake on milk production in 2022–
23, and it is expected that average milk production per farm will be around 10% lower this year
compared with 2021–22. Larger reductions in milk production are expected in northern New South
Wales where seasonal conditions have been least favourable.

Farm-gate milk prices in 2022–23 have increased substantially however, and their positive effect on
farm revenue and profitability is expected to largely offset the negative effects of lower milk
production and higher feed and interest costs. The average farm cash income on dairy farms in New
South Wales is projected to be $369,000 per farm in 2022–23, unchanged in real terms compared
with the previous year.

Tasmania
Tasmania is the only state to record an increase in aggregate milk production over the last twenty
years. Milk production in all other states contracted between 2001 and 2022 as farms in these
regions industry adjusted to a range of factors including the deregulation of dairy marketing
arrangements, periods of severe drought and competition for land from other sources and sectors.
Tasmania rose from the fifth largest milk producing state in 2001 to the third largest in 2022. On
current trends Tasmania may soon surpass New South Wales as Australia’s second largest milk
producing state. Tasmanian dairy farms are, on average, comparatively large in terms of milk
production per farm compared with those in other states (Figure 3).

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 Financial performance of dairy farms, 2020–21 to 2022–23

Seasonal conditions in Tasmania during 2021–22 were mixed, and aggregate milk production across
the state as a whole fell compared with the previous year. This pattern was reflected in ABARES farm
survey results, with milk production per farm declining by around 8% in 2021–22. The average level
of farm cash income was $383,000 – a decline of 15%. Tasmania was the only state to record a
reduction in average farm cash income in 2021–22. However, farm cash incomes remained well
above the 10-year average to 2021–22 ($266,000 per farm in real terms).

In 2022–23 a modest increase in milk production combined with a substantial increase in farm-gate
milk prices is driving a turnaround in farm cash incomes. Average farm cash income in Tasmania is
projected to be $502,000 per farm in 2022–23 – an increase of 31%.

South Australia
South Australia currently accounts for around 6% of national milk production and its dairy farms are,
on average, Australia’s largest in terms of litres of milk produced (Figure 3). Very few dairy farms in
South Australia produce less than 1 million litres of milk per annum, and average milk production per
farm is close to 2.5 million litres.

Although seasonal conditions in 2021–22 were less than ideal, milk production per farm was slightly
higher compared with the previous year, as were farm-gate milk prices. Average farm cash income
was $431,600 per farm – an increase of 12% over the previous year and well above the 10-year
average to 2021–22 ($246,000 per farm in real terms).

As in other states, aggregate milk production in South Australia is expected to fall in 2022–23 but
farm-gate milk prices will be substantially higher. Average farm cash income is projected to be
$544,000 – an increase of 26%.

Western Australia
Like South Australia, Western Australia accounts for a comparatively small share of national milk
production (around 4% in recent years), and its dairy farms are, on average, comparatively large
(Figure 2 and Figure 3).

An increase in average farm-gate milk prices and in revenue from beef cattle led to an improvement
in dairy farm cash incomes in 2021–22. Average farm cash income was $429,100 per farm in 2021–22
– an increase of 17% over the previous year.

Unlike the eastern states, better seasonal conditions mean that aggregate milk production in WA is
expected to be largely unchanged in 2022–23. Average farm-gate milk prices are projected to
increase by 15%, and average farm cash income is projected to increase to $483,000 – 13% higher
than the previous year and well above the 10-year average to 2021–22 ($332,000 per farm in real
terms).

Queensland
Queensland accounted for around 3% of national milk production and 6% of all dairy farms in 2021–
22. The disproportionately large share of farms reflects the fact that dairy farms in Queensland are,
on average, much smaller than those in other states (Figure 3). Queensland dairy farms are also
geographically dispersed, ranging from tropical and sub-tropical regions in the north to more
temperate regions in the south-east.

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 Financial performance of dairy farms, 2020–21 to 2022–23

Average farm cash income in Queensland in 2021–22 was $147,800 per farm – largely unchanged
compared with the previous year and only slightly above the 10-year average to 2021–22 ($130,000
per farm in real terms).

Aggregate milk production in Queensland is expected to fall by around 8% in 2022–23, partly due to
the adverse effects of heavy rain and flooding earlier in the year. Average milk production per farm in
Queensland is expected to reflect this development, although the price received for milk at the farm-
gate is expected to be considerably higher compared with 2021–22. On balance, the profitability of
dairy farming in Queensland is expected to improve in 2022–23, with average farm cash income
projected to be $187,000 per farm – an increase of 27% on the previous year.

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 Financial performance of dairy farms, 2020–21 to 2022–23

Farm capital and farm debt

In real terms the average capital value of Australian dairy farms increased substantially in both 2020–
21 and 2021–22 (Figure 4). The increases reflected the improved profitability of dairy farming over
the period and the broader increases in agricultural land values in recent years that have been driven
by improved commodity prices and comparatively favourable seasonal conditions.

The strong upward trend in the real value of dairy farms over the last 20 years or so largely reflects
the increase in the average size of dairy farms (as measured by holdings of dairy cattle), as the
industry restructures in response to market and technology changes and developments that
generally suit larger, rather than smaller, dairy farms.

Figure 4 Farm capital value and closing dairy herd, Australia, 2000–01 to 2021–22
average per farm

12 600

10 500

8 400

6 300

4 200

2 100

number of dairy
2022–23$ 0
cattle

Total closing capital value Dairy cattle on hand at 30 June

Notes: p Preliminary estimate. Changes over time reflect short-term factors like changes in market and seasonal conditions,
and longer-term factors such as farms entering or leaving the industry, and broader changes in macro-economic conditions
such as interest rates, exchange rates, and market returns in other sectors. Appropriate consideration of the long-term
factors is essential when interpreting changes in capital and livestock values over periods longer than 3 to 5 years.
Source: ABARES Australian Dairy Industry Survey

The average level of farm debt has also trended up in real terms over the longer term, largely
reflecting the increase in the average size of dairy farms (Figure 5). Average equity rates (the ratio of
owned capital to total capital) show some variability over the longer term, but were relatively stable
at just over 80% for much of the last decade. Average equity rates increased in 2020–21 and 2021–22
as dairy farm capital values surged.

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 Financial performance of dairy farms, 2020–21 to 2022–23

Figure 5 Farm business debt and farm equity ratio, dairy farms, Australia, 2000–01 to
2021–22
average per farm

2.00 100
1.75
80
1.50
1.25 60
1.00
0.75 40

0.50
20
0.25
2022-23$m
0.00 %
0

Equity ratio at 30 June (%) Farm business debt at 30 June ($)

Notes: p Preliminary estimate.
Source: ABARES Australian Dairy Industry Survey

Debt servicing
In 2021–22 the ‘within year’ change in the total debt carried by dairy farms was an increase of
$161,900 per farm. Total closing debt (that is, farm debt at 30 June) on dairy farms in 2021–22
averaged $1.511 million per farm, meaning that average debt levels increased by 12% between the
beginning and the end of the financial year.

Despite the increase in debt in 2021–22, the ability of dairy farms to service this debt (as measured
by the ratio of interest payments to gross farm income – the interest coverage ratio) improved on
the back of much higher farm cash incomes. However, interest costs associated with farm debt are
projected to increase substantially in 2022–23, and are likely to increase further in subsequent years
if interest rates remain at or around current levels.

The consequences for farms carrying large amounts of debt are likely to be material. For a dairy farm
carrying the ‘average’ level of debt in the industry in 2021–22, each 1 percentage point increase in
the rate of interest payable on that debt represents an increase in annual cash costs of $15,000.

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 Financial performance of dairy farms, 2020–21 to 2022–23

Figure 6 Interest coverage ratio, dairy farms, Australia, 2000–01 to 2021–22

average per farm

100

80

60

40

20

Notes: p Preliminary. Interest coverage ratio is calculated as total interest paid as a proportion of farm cash income plus
interest paid.
Source: ABARES Australian Dairy Industry Survey

Liquid assets and non-farm income

Dairy farms typically hold fewer reserves in the form of liquid assets (bank deposits, farm
management deposits etc) compared with broadacre farms. This may be because dairy farms
typically receive regular and reasonably predictable monthly payments for their main output – raw
milk. In contrast, broadacre livestock and cropping farms typically receive much less frequent and
predictable payments for the commodities they sell. Cropping farms, for example, can face entire
years when receipts are minimal – particularly during droughts. As a result, broadacre farms typically
rely more heavily on savings and other financial reserves to manage within-season and between-
season risks.

On average, dairy farms held $174,400 in liquid assets in 2021–22. This was equivalent to around
12% of total cash receipts in that year, and below the average ratio of liquid assets to total cash
receipts in this industry over the past twenty years, which was around 20% (Figure 7).

The reduction in the ratio of farm liquid assets to total cash receipts reflects both a reduction in
liquid assets held, and the more recent jump in cash receipts. It is expected that average liquid asset
holdings on dairy farms will increase in 2022–23 (and beyond) if the recent improvement in dairy
farm incomes is sustained.

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 Financial performance of dairy farms, 2020–21 to 2022–23

Figure 7 Ratio of farm liquid assets to total cash receipts, dairy farms, Australia, 2000–01 to
2021–22
average per farm

50

40

30

20

10

%0

Ratio of liquid assets to total cash receipts Average ratio over the period
Notes: p Preliminary.
Source: ABARES Australian Dairy Industry Survey

On average, small to medium sized dairy farms (based on farm turnover) tend to hold relatively more
liquid assets as a proportion of their annual farm cash income compared with larger farms (Figure 8).
Also, small dairy farms tend to rely more heavily on non-farm income to support household
expenditure. For example, small dairy farms sourced one-third (33%) of their total household income
(farm cash income plus non-farm income) from off-farm wages and salaries in recent years. Among
large farms this proportion was 4%.

The use of Farm Management Deposits (FMDs) is less common among dairy farms compared with
livestock and cropping farms. For example, at 30 June 2022 an estimated 14% of dairy farms held
FMDs, compared with 21% of livestock farms. The average FMD balance amongst dairy farms holding
FMDs was $272,300 per farm.

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 Financial performance of dairy farms, 2020–21 to 2022–23

Figure 8 Farm household income and liquid assets by farm size, dairy farms, Australia,
2000–01 to 2021–22
average per farm

800,000

700,000

600,000

500,000
Off-farm
400,000 income
Farm cash
300,000 income

200,000 Liquid assets

100,000

2022–23$
Small Medium Large Very-large
Notes: Size groups determined by farm business turnover – the sum of total cash receipts and the change in trading stocks.
Small (less than $360,000), Medium ($360,000 to $940,000), Large ($940,000 to $1.7 million), Very-large (more than $1.7
million).
Source: ABARES Australian Dairy Industry Survey

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 Financial performance of dairy farms, 2020–21 to 2022–23

Box 2 ABARES farm survey industry definitions

The results in this report are for farms included in the Australian Dairy Industry Survey (ADIS). The ADIS is
funded by the Department of Agriculture, Fisheries and Forestry. Data are provided at national and state level.
The main dairy farming regions in Australia are illustrated in Map 1.

Map 1 Australian dairy regions

Source: ABARES and Dairy Australia (2022a)

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 Financial performance of dairy farms, 2020–21 to 2022–23

References
Dairy Australia 2022a, Australian Dairy Industry In Focus 2022, accessed 2 January 2023.

Dairy Australia 2022b, Situation and Outlook December 2022, accessed 1 February 2023.

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