Foreword

The dairy sector is the largest agricultural industry in Victoria and makes a vital contribution to the state’s economy. Victoria’s dairy exports were valued at $2.3 billion in 2010, accounting for almost a third of total Victorian agri-food exports.

The Victorian Government – through the Department of Primary Industries (DPI) – provides a range of services to the dairy industry to support its development. Our primary role is to promote economic development in a way that also supports environmental sustainability and community capacity to manage change.

This document, DPI services to dairy farmers, aims to clearly outline our strategic context and the services we provide to dairy farmers. These include research, development, extension, regulatory and emergency management services. DPI also has a significant policy role that helps support and guide service delivery.

DPI is strengthening the way we deliver services making them better targeted, more accessible and relevant to the needs of farm businesses. These services will be delivered via greater collaboration with other service providers, including Catchment Management Authorities, agribusiness, Regional Development Programs and other key stakeholder groups.

A National Dairy Research, Development and Extension Strategy is also being finalised under the guidance of the Primary Industries Ministerial Council and Dairy Australia. This will see DPI focus service delivery on Victoria’s dairy industry priorities as part of a coordinated national approach.

This document has been developed with input from a number of industry partners and DPI is committed to continuing to work closely with stakeholders to ensure the dairy industry is well placed to meet the challenges and opportunities that lie ahead.

Jeff Rosewarne
Secretary
Department of Primary Industries

Introduction

Emerging markets and the availability of new technologies and business practices are providing opportunities for many dairy farmers. Yet they also face challenges arising from effectively integrating land, water and biodiversity management with productive land use, climate variability, declining productivity growth and increasing competition from overseas producers.

To capitalise on the opportunities, as well as respond to the challenges, farmers are adopting contemporary practices and business models and targeting new and emerging strategic markets.

Developing and adopting more sustainable practices are not only essential ingredients for farm productivity, but also expectations of the Victorian community. DPI provides a range of services to support the integration of good land and water management practices into farming systems, to support land stewardship and sustainable productivity. DPI’s task is to focus our service delivery where a core role for government exists and boost our collaboration with, and support of, other service providers.

This document aims to outline the context for DPI’s operations and to describe the 11 key services we provide to dairy farmers in 2011–12.

We have developed this document based on an analysis of our role and expertise, as well as input from a range of industry stakeholders. Its content is reviewed annually.

This document’s target audience is industry partners, other service providers and DPI staff. It has been designed to help clarify DPI’s role, minimise any duplication of effort and help identify specific collaborative opportunities.

A shorter document specifically describing the 11 key services will be published and communicated to a broader dairy farmer audience.

An Environment of Change

Between 1982 and 2002, the Australian dairy industry experienced strong growth, with Victoria’s milk production reaching a peak of 7.4 billion litres in 2001–02. Since then, the industry has been affected by a series of dry seasons and major water shortages with production falling to 5.8 billion litres during the 2009-10 season. Better weather and operating conditions during 2010-11, saw production increase to 5.9 billion litres.

In the past, about half of Victoria’s milk production was derived from irrigation. As a result of continued dry conditions and low water allocations, this figure is now around 35 per cent. In recent years, many irrigated dairy farmers have increased their debt levels, particularly as a result of procuring off-farm feed, and/or have reduced cow numbers to remain viable.

Dairy farmers are working hard to adapt to a more variable climate, lower irrigation water entitlements and new water trading arrangements. One of the most profound changes in recent years has been the need for modified or alternative feeding systems.

Markets offer new opportunities for dairy farmers to receive payments for making environmental improvements. This can occur via auction schemes or selling tradable credits to parties wanting to secure environmental outcomes such as biodiversity, habitat, water quality or carbon sequestration.

There is now more pressure on the farming sector to manage the natural resources under its care. For example, better nutrient management on dairy farms in Gippsland that will reduce the risk and severity of algal blooms in the Gippsland Lakes.

Changing market expectations are also likely to provide incentives for farmers to meet higher environmental management standards. There are price signals in some niche markets for food products with associated environmental attributes, for example, ‘carbon neutral’.

A growing world population centred in Asia, and increasing affluence in some markets, is likely to drive strong demand for dairy products.

Industry Challenges and Opportunities

In March 2011, the Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) reported that the Australian dairy industry’s short to medium-term prospects were positive. Even so, the industry continues to face challenges and uncertainties, including those listed below.

Low productivity growth

In recent years productivity growth in the dairy industry has fallen to around 1 per cent per year, down from over 2 per cent during the 1990s. This decline has been attributed to a number of factors including the prolonged drought, recent floods, lower rates of technology adoption and reduced investment in research and development. Productivity growth and the ability to respond quickly to changing economic conditions are essential to maintaining competitiveness.

Competition and fluctuations in markets

Competition in global markets for dairy products is growing, with some eastern European countries emerging as new competitors. At the same time local dairy production capacity is increasing in some Asian countries, such as China.

A significant drop in global dairy prices occurred in 2009, affecting those farmers supplying processors with significant export exposure. Global dairy prices have improved somewhat and are projected to increase further in 2011–12. Managing price risk will continue to be a key requirement for the industry.

Globally the Australian dairy industry is viewed as safe, clean and relatively cost-effective. Maintaining this reputation will help ensure significant opportunities for growing market share into the future.

Climate variability and associated policies

The impact of climate variability on southern Australia is predicted to be severe. Implications include reduced rainfall, more intense storm events, greater rainfall variability and evaporation, increased water scarcity and an altered distribution and risk profile for pests and diseases.

As a significant source of methane, the dairy industry will also come under increased pressure to reduce greenhouse gas emissions, and policies to achieve this may result in higher costs for energy, fuel and fertilisers. Enhanced productivity and improved management of natural resources are likely to become more important.

Competition for natural resources

Rising land prices have affected many dairy farmers, limiting opportunities for productive expansion in some areas. During the past decade, low water availability has provided significant challenges for dairy farms reliant on irrigation. This has led to more farmers using off-farm feed sources rather than producing pasture on-farm. Access to water, and efficient water management, will continue to be a key challenge for the dairy industry.

The Murray-Darling Basin Authority is preparing a plan for the management of water resources that will place new limits on the quantity of water that can be taken from the Basin. It is likely that current policy to reassess the level of consumptive water use in the Murray Darling Basin will have a significant impact on many industries and regional communities.

Four regional Sustainable Water Strategies are being developed to enable long-term water security across Victoria. Each strategy sets out a long-term regional plan to secure water for local growth, while maintaining the balance of the area’s water system and safeguarding the future of its rivers and other natural water sources. Each strategy will provide a stocktake of all water resource available within a region, and outline the planning and actions needed to respond to risks and ensure future water availability for communities, business, industry and the environment.

Biosecurity risks

The Biosecurity Strategy for Victoria commits to protecting our primary industries, environment, social amenity and human health from biosecurity threats. The strategy emphasises the importance of Victoria having an effective incursion response capability in place, including livestock identification and tracking systems. Biosecurity Victoria invests in programs for the dairy industry relating to the control of animal diseases (such as bovine Johne’s disease), pasture pests and zoonotic diseases.

Social change and labour shortage

The declining population in rural towns and the continuing trend to fewer but larger farms is leading to a labour and skills shortage in some areas.

With its labour-intensive nature and the need for milking seven days a week, some younger people do not see dairying as an attractive career choice. Ongoing efforts to attract, train and retain people and skills in the industry will therefore be important.

Meeting consumers’ needs and maintaining market access

The evolving expectations of dairy consumers in relation to animal welfare (particularly bobby calf welfare and animal transport), chemical residues and carbon emissions need to be continually monitored.

DPI’s Investment Context

Strategy-driven outcomes and investments

DPI’s vision is to enable the state’s primary industries to sustainably build Victoria’s wealth and wellbeing. Our strategic plan identifies three headline outcomes to achieve this vision:

• competitive businesses and efficient markets
• sustainably managed natural resources
• engaged, safe and responsible communities.

Supporting the DPI strategic plan is the Agriculture and Fisheries Four-year Strategy that sets the direction for our investment in the agriculture and fisheries sector. Four strategic outcomes will drive our investment decisions:

• increasing productivity and net value (Outcome 1)
• growing market access (Outcome 2)
• sustaining the natural resource base (Outcome 3)
• protecting and enhancing community resources (Outcome 4).

Role of Government

A major role of government is to invest in important areas for society where industry and individuals under-invest due to their inability to capture sufficient or exclusive direct benefits (‘market failure’). DPI determines investment priorities and evaluates projects through a rigorous investment process, which considers ‘market failure’ and the likelihood of net benefits arising from the investment.

In allocating funds to projects, DPI also considers the level of industry support. We seek co-investment from industry in proportion to the direct benefit industry is likely to receive from such investment.

Where industry and private benefits predominantly arise from a project, we are unlikely to invest, given that society at large is unlikely to be a key beneficiary. To this end, DPI seeks to complement but not compete with the private sector, which is often better-placed to provide services that increase enterprise-level profitability.

Investing in Victoria’s dairy industry

DPI invests more than $180 million annually in research, development and extension (R, D&E) and regulatory services for the agriculture and fisheries sector.

This includes an investment of around $22 million in R, D&E activities related to the dairy industry. This investment is complemented by co-investment from industry and the Australian Government, mainly through Dairy Australia, dairy companies, the Geoffrey Gardiner Dairy Foundation, Department of Sustainability and Environment (DSE) and Catchment Management Authorities (CMAs).

The Victorian Government invests more than $70 million each year in catchment and natural resource management. This investment helps to deliver land, water and biodiversity outcomes to protect and restore our catchments and preserve our ecosystems. In addition, the Government will invest some $11 million in 2011-12 in specific DPI land and water services targeted at farmers and focussed on managing potential negative impacts of agricultural activities, supporting effective integration of productivity and sustainability services in farming systems and increased farm water use efficiency and water savings for both environmental and productive benefits.

It is anticipated that these directions and priorities will be reflected in new Regional Catchment Strategies developed during 2011-12 by Catchment Management Authorities.

DPI also invests more than $50 million each year in R, D&E and regulation with regard to cross-industry issues, such as climate change, invasive plants and animals and biosecurity – much of which directly relates to the dairy industry.

The National Primary Industries Research, Development and Extension Framework aims to improve the efficiency and effectiveness of the national R, D&E effort through better collaboration and a focus on national priorities. The framework’s intent is to provide a national focus on research, regional focus on development and local focus on extension.

Within dairy, the national strategy for R, D&E has been articulated through the Dairy Moving Forward initiative. Aligned with Dairy Moving Forward, DPI will retain and build research capability in areas strategically important to the national dairy industry, and will seek opportunities to work collaboratively with other R, D&E organisations. An example of such a collaboration includes the Dairy Futures Cooperative Research Centre (CRC) where DPI collaborates with 12 other participants in the science of applied transformational genetics for the Australian dairy industry.

DPI’s Priorities for the Dairy Industry in 2011–12

Productivity

• The Dairy Futures CRC aims to increase the value of pastures and dairy cattle. Projects will apply advanced genetic technology to deliver more productive forages (e.g. greater digestibility, disease resistance or drought tolerance), improve the prediction of genetic merit in cattle using DNA-based information, and help to reduce the industry’s environmental footprint.
• Breeding for Performance, which helps farmers develop breeding objectives and plans appropriate to their local context and conditions. This workshop series was developed in conjunction with the Australian Dairy Herd Improvement Scheme (ADHIS).
• The Flexible Irrigated Forage Systems project is developing guidelines to help irrigation farmers make more informed forage selection decisions. Areas of focus include adaptive forages to optimise production, utilisation of feed, and water-use efficiency.
• The Flexible Feeding Systems project is exploring the role of partial mixed-ration feeding systems (grazing pasture plus mixed rations) and their effect on milk functionality for products such as yoghurt.

Market and business development

• FutureDairy is a research and development project investigating forage, feeding and technological innovations for the dairy industry, including automatic milking systems.
• Support for access to programs including the Pasture Consumption Calculator (to calculate on-farm annual pasture removal), CowTime (to make milking easier, quicker and more productive), Countdown Downunder (to help farmers meet milk quality standards) and InCalf (to improve herd reproductive performance).
• The Dairy Industry Farm Monitor Project, providing accurate and timely farm-level economic and productivity data to support decision making.
• Providing information to, and training for, private service providers in farm management guidelines and decision-support tools related to irrigated and dryland dairy systems.

Biosecurity preparedness

• Minimise potential biosecurity disruptions to market access through effective disease surveillance, enhanced emergency animal disease preparedness, product integrity and traceability programs.
• Minimising the threats from invasive plant and animal species through integrated communication, surveillance and compliance programs.

Natural resource management

• Programs supporting improved land and water management to reduce the environmental impact of irrigated agriculture, including irrigation whole farm planning, irrigation system performance assessments, water savings plans, sustainable irrigation development and providing information and advice on irrigation system selection and design.
• The Accounting for Nutrients on Australian Dairy Farms project aims to develop a nationally agreed framework for nutrient accounting of nitrogen, phosphorus, potassium, sulphur, calcium and magnesium for the dairy industry.
• Improved surface water management to remove excess rainfall run-off from irrigated land and addresses risks such as waterlogging, salinisation and downstream water quality impacts.
• Climate variability and seasonal risk information to support decision making and inform the industry of climate change scenarios and the likely impacts on pasture-growing seasonal windows, animal health and overall enterprise risks.
• Design of lower-greenhouse-gas-emitting dairy production systems through increased production efficiency, new forage and feeding combinations and improved animal and on-farm nitrogen management.
• Advice on and regulation of production animal welfare, including demonstration of approaches that improve dairy cattle welfare outcomes.

Emergency management

• Support for dairy farmers to prepare for and recover from emergencies.

DPI’s Service Delivery Context

DPI works in partnership with other service providers to build capacity and deliver better targeted, accessible and relevant services to Victoria’s dairy farmers.

To achieve this, DPI will:

• target services to achieve greatest benefit for Victoria
• focus on public benefit, with industry funding supporting industry benefits
• consider who is best placed to deliver services
• not compete with effective private providers or community groups
• grow the capability of DPI staff and the service provider sector as a whole
• manage risks to ensure the service delivery strategy is successful.

DPI regularly consults with the dairy industry to define needs and future services. We use six key approaches to inform the design and delivery of services:

• research – the discovery of new knowledge and technologies
• development – the testing and modification of new knowledge and technologies at a regional level
• retailing information – providing information direct to farmers (e.g. end-users)
• wholesaling information – packaging information on research and development results and new practices for ‘retail’ service providers (e.g. private consultants, community groups)
• signposting – referring farmers and service providers to other (non-DPI) sources of information and services
• regulation – to achieve compliance with government legislation.

DPI ‘retails’ services where net public benefits arise and/or where industry co-invests in service delivery. Specifically, we will:

• provide one-on-one services to farmers for compliance and land and water management planning, but usually not provide one-on-one business or productivity consultancies, unless there are exceptional circumstances e.g. fire and flood
• work, often in partnership with other providers, to facilitate group discussions where this method is most effective for the target audience
• increase the use of online service delivery including improved content delivery systems (e.g. targeted webinars, farmview videos and blogs)
• continue to include farm visits in the induction and training of our field staff.

DPI ‘wholesales’ information to other providers where they are best placed to deliver services directly to farmers. This approach also helps to grow the capability of the service sector as a whole, so farmers have greater access to relevant information.

Specifically, we will:

• identify and package relevant research and development results (from DPI and other sources) for service providers, who in turn ‘retail’ that information to farmers
• package both (DPI) branded and un-branded products for use by service providers
• increase our ‘knowledge brokering’ and facilitation role to effectively link people, information sources and resources
• increasingly use specific and tailored methods for interacting with service providers.

Context for services to the dairy industry

Through a Memorandum of Understanding with Dairy Australia and investment in alliances such as the Dairy Futures CRC, DPI provides a range of services directly to dairy farmers. We are also increasing the packaging of R, D&E information for other service providers (wholesaling). Wholesaling strategies will be used where they deliver the greatest impact, taking into account the type of service and the other service providers.

We do not anticipate charging farmers or other service providers for our services, apart from cost-recovery for some conferences, field days and training programs. Thus, the terms ‘retail’ and ‘wholesale’ are descriptions of the process, and do not represent commercial activities.

DPI provides a range of sustainable irrigation and broader natural resource management services directly to dairy farmers. These services are delivered through a mix of partnerships with other service providers.

DPI will continue to monitor for exotic pests and diseases at the border and post-border and intervene to minimise these threats. We will work with farmers and industry bodies to implement animal disease surveillance and reporting systems. On-farm combined with border surveillance is crucial for early detection of exotics and validation of specific disease status for certification purposes.

DPI administers the following legislation relevant to animal industries:

• Prevention of Cruelty to Animals Act 1986
• Agricultural and Veterinary Chemicals (Control of Use) Act 1992
• Stock (Seller Liability and Declarations) Act 1993
• Impounding of Livestock Act 1994
• Livestock Disease Control Act 1994
• Catchment and Land Protection Act 1994
• Dairy Act 2000.

In addition, developing and implementing industry and government co-regulatory arrangements will receive greater emphasis. These will help manage any emerging biosecurity threats. To this end, the intent of the Livestock Management Act 2010 is to encourage the development and uptake of industry quality assurance programs.

DPI services to dairy farmers in 2011–12

DPI offers 11 services to dairy farmers and their service providers. These services are detailed in full on the following pages.