You are on page 1of 36

Tasmania Delivers...

The dairy industry

in Tasmania
A guide for investors
September 2014
The dairy industry in Tasmania


2 Tasmania – a unique island of opportunity

4 The Tasmanian dairy industry – history

5 The Tasmanian dairy industry – the industry today

10 Value proposition

18 Indicative costs of buying a dairy farm in Tasmania

26 Dairy conversion opportunities

32 Investment regulations and business entry

33 Assistance for investors


This marketing document was developed by the Department of State Growth.

The information in this paper has been prepared with care, but no warranty
is given as to the accuracy of the information, or for any advice given, or for
omissions from this paper. Readers rely on the information at their own
risk and should seek their own independent legal and financial advice.

© State of Tasmania December 2012. Reviewed and reprinted September 2014.

Images courtesy of DairyTas, Simon de Salis and Tony Crehan.

A guide for investors

Key reasons for investing in the »» increasing global demand for dairy »» opportunity to capitalise on climate
Tasmanian dairy industry: products – forecast to grow at 3.9 change driving Australian milk
»» significant scope for profitable per cent per annum until 20202 production to cooler, wetter parts of
the country
expansion of low-cost milk »» low production costs through
production could see Tasmania’s pasture-based farming »» forecasts for a climate-changed world
milk output almost double to point to a long term and profitable
1.5 billion litres per year
»» highly competitive land prices – land future for the Tasmanian dairy
values in Tasmania are lower than
»» a growing industry – Tasmanian milk many other Australian states and
production increased by around dairying areas in New Zealand, with »» first world infrastructure and a well-
34 per cent over the past 10 years, the north-west, north-east, Upper organised, cohesive dairy industry
while Australian milk production Derwent and Meander Valley sector with clear, demonstrated
declined by 9 per cent1 regions all offering opportunities for capability that includes multinational,
»» substantial factory investment has investment national and Tasmanian dairy
manufacturing companies that
occurred, providing major support »» a higher return on investment – operate eight large and several
for new dairy farm investment Tasmanian dairy farms averaged 6.1
small processing facilities.
»» Tasmania’s environmental per cent return on assets (including
advantages – comparative natural return on capital) over the past
water advantage, irrigation decade, as opposed to Australia as a
investments, absence of major whole which offered 5 per cent3
animal diseases and an ideal climate
for pasture-based dairy production 1. DairyTas IntoDairy website, www.intodairy.
»» international and national market 2. Senior Dairy Analyst for Rabobank, Michael
recognition of the quality of Harvey citing Rabobank report, Show me the
Money in Tasmanian Country, 10 Feb 2012, p 10.
Tasmanian dairy products 3. DairyTas IntoDairy website,
(Financial Analysis – Benchmarking), 2014
4. Antarctic Climate and Ecosystems CRC,
Climate Futures for Tasmania, Impacts on
The dairy industry in Tasmania

Tasmania – a unique island of opportunity

Tasmania’s temperate climate, fertile approximately one quarter the size underpinned by reliable rainfall and
soils, reliable rainfall and sunshine all of its neighbouring Australian state, increasing irrigation infrastructure.
ensure excellent growing conditions Victoria. Tasmania is similar in size to This translates to lower costs of
for lush pasture, underpinning the Ireland and Sri Lanka, and half the size production, considerable growth
production of premium quality dairy of Fujian Province in China. potential and a more reliable milk
products. Tasmanian dairy cows are supply, when compared with many
The dairy industry is the largest
housed outside all year round, grazing dairy districts both in Australia and
sector of Tasmania’s agricultural
on grass and clover, while enjoying internationally.
industry and a significant contributor
some of the cleanest air in the world.
to the Tasmanian economy. It offers a The dairy industry is a priority sector
Discovered by Dutch explorer Abel number of investment opportunities, with excellent growth prospects
Tasman in 1642, Tasmania is Australia‘s including large-scale pasture-based and the Tasmanian Government
only island state and is separated from milk production, specialty cheese encourages investment in milk
mainland Australia by Bass Strait, a manufacture and large-scale dairy production (farming) and value adding
240 kilometre stretch of water. commodity processing. within the state.
The state’s area is 68 330 square Tasmanian dairy farmers benefit
kilometres with 3 300 kilometres from a sustainable, low-cost,
of coastline, making Tasmania pasture-based production system,
A guide for investors

Tasmania at a glance

Location Located broadly at latitude 41-42° south and longitude 144° east, and separated from the
Australian continent by Bass Strait. Tasmania is a group of over 300 islands, with the main island
being 315 km (180 miles) from west to east, and 286 km (175 miles) north to south.
Climate Tasmania has a mild, temperate maritime climate with four distinct seasons, making it the ideal
location for production of premium food and wine. In summer (December to February),
the average maximum temperature is 21° Celsius (70° Fahrenheit). In winter (June to August),
the average maximum is 12° Celsius (52° Fahrenheit) and the average minimum is 4° Celsius
(40° Fahrenheit).
Government Tasmania is a parliamentary democracy governed according to the principles of the Westminster
System. Since 1901, Tasmania has been a state of the Commonwealth of Australia.
Population At September 2013, the estimated resident population of Tasmania was 513 400.
Capital city The capital of Tasmania is the city of Hobart. The greater Hobart area has a population of
approximately 216 000 people.
Major industries The major industries are food and agriculture (including wine, dairy, salmon, fruit, vegetables
and red meat), tourism, mining and mineral processing, forestry and related products, specialist
manufacturing, research and science, Antarctic–related industries, building and construction,
renewable energy, and information and communications technology.
Community and lifestyle Tasmania’s rich natural heritage, its diverse range of arts and cultural experiences, its lifestyle
opportunities and its public spaces are advantages that help to make the state one of the world’s
most liveable places.
History and heritage Aboriginal people are thought to have first moved onto the island 30 000 years ago, during
an ice age which exposed a land bridge between the island and mainland Australia. Europeans
from the British Isles established a penal colony in 1803. During this time, the island was called
Van Dieman’s Land. The transportation of convicts ended in 1853 and the island was renamed
Tasmania in 1856.

King Island

Flinders Island





Tasmania Bicheno •

Swansea •
• Queenstown
• Strahan

Hobart •

The dairy industry in Tasmania

The Tasmanian dairy industry – history

Since European settlement in 1788, In addition to the dairy cooperatives, up The early 1970s saw the merger of
the production of milk has been a key to 20 private factories operated in the Tasmanian dairy cooperatives, with
industry within Australia’s agriculture Circular Head region at various times Table Cape and Duck River being the
sector. From the original four cows and from 1893. first to form United Milk Products.
one bull brought out with the First Fleet, In 1981, United Milk Products
In the early 20th Century, the
the industry continued to expand as amalgamated with north-western and
introduction of refrigeration allowed
more parts of Australia were explored. north-eastern cooperatives to form
dairy products to be transported to
United Milk Tasmania (UMT).
Dairying in Tasmania began with farmers markets, and native pastures were
converting thickly wooded landscapes replaced with more productive exotic Up until 1997, UMT operated three
to farming land. In the early to mid- species. This enabled farmers to main production sites at Wynyard
1800s, Tasmanian farmers milked a increase stocking rates, resulting in a (cheese), East Devonport (milk
few cows for their own use, with any dramatic increase in milk production powders and butter) and Legerwood
surplus sold for cash or exchange of from the available land. (milk powder). A new site was built at
other commodities. It wasn’t until Spreyton in 1997, and the Legerwood
Another factor that encouraged rapid
Tasmania’s first cooperatively owned and East Devonport operations
growth in the dairy industry was the
butter factory, the Table Cape Butter were closed soon after. Bonlac Foods
introduction of the milking machine
and Bacon Factory, was established in took over UMT in the late 1990s
into Australia. In the late 1930s, once
Wynyard in 1892 that the commercial and subsequently, the world’s largest
electricity became more readily
dairy industry began to grow. dairy exporter Fonterra acquired the
available to farms, milking by machine
operation in 2004.
The Table Cape cooperative, modelled was adopted as the norm and farmers
on a successful Victorian operation, were able to increase their herd sizes as
was closely followed by others including the machines reduced the time needed
the North West Cooperative Dairy to milk their cows.
Company, the Duck River Cooperative
Butter and Bacon Factory in Smithton,
and the Ringarooma Cooperative in the
north east.
A guide for investors

The Tasmanian dairy industry – the industry today

Today’s dairy farms are usually large- Burnie and Tasmanian Dairy Products The National Dairy Farmer Survey
scale, capital-intensive operations using in Smithton. Over the next 10 years, measures industry confidence as the
the latest technology to produce whole milk production has the potential to proportion of farmers who are positive
milk. Cows are milked up to twice daily, grow from 788 million litres per year about the future of the industry.
in large dairy sheds which can milk over in 2011–12 to around 1.5 billion litres The survey results highlight the very
250 cows per hour. Alternative systems per year. different levels of confidence between
operate that allow multiple herds to dairying regions. Tasmania remains
The major dairy processing companies
be milked through single dairy sheds. the Australian industry’s most positive
now operating in Tasmania are
Other options are milking three times region. In May 2014, 91 per cent of
Fonterra, Lion, Mondelēz (Cadbury)
every two days, or once per day. farmers were positive about the
and Tasmanian Dairy Products (major
industry’s future, compared to 75 per
Deregulation of the Australian industry shareholder Murray Goulburn).
cent in 2011. A high proportion of these
in 2000 and a growing export focus, Others include Classic Foods (Murray
farmers describe themselves as very
have seen production increase in the Goulburn), Ashgrove Cheese,
positive about the future and many are
more temperate, higher-rainfall areas of Pyengana Cheese, Westhaven Dairy,
planning farm investments7.
Australia that are more suited to low- Bruny Island Cheese, Wicked Cheese
cost, pasture-based dairy farming. Co, Grandvewe and Betta Milk.
Over recent years there has also been Dairy is now Tasmania’s biggest
an increase in the number of small-scale agricultural industry. In 2013-14,
dairy and cheese-making operations in the estimated value of farm milk
Tasmania, as more operators move into production was around $440 million5.
adding value to their business. Between The value of packed and processed
2012 and 2014, processing capability products in 2011–12 was approximately
grew by 300 million litres due to $660 million6.
investment in new factories by Lion in
5. DairyTas IntoDairy website, www.intodairy.
6. DPIPWE, Dairy Industry Scorecard, 2011-12
7. Dairy Australia: Situation and Outlook,
May 2014
The dairy industry in Tasmania

Prime dairy regions Dairy industry summary8

»» 437 farms
King Island
»» 160 385 cows
»» Average of 367 cows per farm
»» 1 500 people employed on farms
North West
North East »» 805 million litres of milk in 2013–14
Meander Valley »» Average annual growth in 10 years
42˚S Northern Midlands of three per cent

»» Eight per cent of national production

»» Total average value of dairy farm gate
Derwent Valley income $440m 2013–14

Table 1: Tasmanian dairy farms by region9

Regions Farms Cows Percentage Average herd
of cows1 size
Burnie 11 2 109 1 192
Central Coast 27 7 115 4 264
Circular Head 151 67 523 42 447
Kentish 22 4 817 3 219
King Island 15 3 577 2 238
Latrobe 6 1 057 1 176
Meander Valley 72 25 250 16 351
North-East 70 23 952 15 342
Northern Midlands 7 5 985 4 855
South 12 5 025 3 419
West Tamar 7 2 120 1 303
Wynyard / Waratah 37 11 855 8 320
Totals 437 160 385 100 344

1. Rounded to the nearest whole number.

8. DairyTas Dairy Industry Summary, August 2014

and Tasmanian Dairy Industry Authority (TDIA)
diary licence data, 30 June 2013
9. TDIA diary licence data, 30 June 2013
A guide for investors

Tasmanian milk production (ML) and milk price ($/kg milksolids) 1994 – 201410

900 $8.00

800 $7.00


Milk production

Milk price



100 $1.00

0 $0.00

















20 0

20 1

20 2

20 3


























Production, million litres Milk price, $/kg milksolids

10. DairyTas 2014

The dairy industry in Tasmania

Major Investors: Lion Mondelēz (Cadbury)

Lion (formerly National Foods) is Mondelēz owns and operates
a wholly owned subsidiary of Kirin Cadbury, a global confectionery
Fonterra is a global dairy company
Holdings. Lion’s Tasmanian interests business. Mondelēz’s operation
involved in large-scale milk procurement,
include cheese and drinking milk includes a milk drying plant in the
processing, marketing and
production, and a brewery. The state’s north west at Burnie and a
management. Fonterra is the largest
dairy portfolio includes a number of chocolate manufacturing plant in the
processor of milk in the world, with
market-leading brands across the milk, south at Claremont.
a supply chain spanning over 140
cheese and dairy product categories.
countries and producing more than Mondelēz has approximately 60
two million tonnes of dairy ingredients, Lion processes around 20 per cent of suppliers and uses around 12 per
valued-added and specialty ingredients, the total Tasmanian milk production cent of Tasmania’s total milk supply.
and consumer products every year. and is investing approximately $150
million to consolidate Australian
In Australia, Fonterra operates 11
specialty cheese production at
manufacturing sites, including two in
Burnie and to upgrade its award-
Tasmania at Wynyard and Spreyton. In
winning King Island factory.
Tasmania, Fonterra has more than 300
suppliers and processes approximately
60 per cent of the state’s milk,
producing approximately 60 000
tonnes of cheese, milk powders,
butter and lactose.
A guide for investors

Tasmanian Dairy Products Betta Milk

Tasmanian Dairy Products (TDP) is a Betta Milk Co-op Society Ltd produces
new dairy company that manufactures fresh milk products (milk, cream and
milk powder in a new facility at custard) and has around 30 per cent of
Smithton in north-west Tasmania. the local market for those products. It
The Murray Goulburn Co-operative uses about two per cent of Tasmania’s
and Mitsubishi Corporation are the total milk production but does not
major shareholders of the company. buy milk directly from farm. It has a
TDP’s plant is designed to manufacture processing facility at Burnie and in 2011
high-specification milk powders and won a Dairy Industry Association of
associated products, with a processing Australia award for the best full cream
capacity of approximately 250 million milk in Australia.
litres per year.
Murray Goulburn also owns a UHT
milk processing facility based at Edith
Creek near Smithton, which uses close
to five per cent of Tasmania’s total milk
The dairy industry in Tasmania


Value proposition

Tasmania is in a unique position within King Island Flinders Island

Australia for increased investment in
dairy farming. The state’s expanding
milk processing capacity offers 800–1000 700–800
opportunities and Tasmania’s climate
and water availability ensure consistent
and predictable production rates.
Smithton 800
Climate George Town
0 Burnie
Tasmania has a temperate climate, 140 Devonport 10 Scottsdale
1600 0
fertile soils, reliable rainfall and plenty 1800 Launceston
of sunshine, all of which ensure 0 Deloraine

excellent growing conditions for lush 0
220 Bicheno

pastures, underpinning the production 600


Campbell Town
of premium quality dairy products. Queenstown
Tasmanian dairy cows spend their time
outside all year round, grazing on grass
and clover whilst enjoying some of the 1800 New Norfolk
cleanest air in the world.
Huonville Hobart
Water availability

Millimetres of precipitation

A key component of sustainable per year

agriculture is the availability of reliable
water supply for irrigation. Dairy
stocking rates are directly linked to
the availability of water and Tasmania’s Source: vW Maps ©2009 Martin von Wyss, vW Maps Pty Ltd.
A guide for investors


Table 2: Indicative irrigation requirements11

Region Location Irrigation
North west Burnie 4.6
Currie (King Is.) 4.0
Mawbanna 2.6
Redpa 2.7
Sheffield 4.2
Smithton 3.0
Woolnorth 3.9
Wynyard 3.9
North Cressy 5.3
Deloraine 4.7
Lilydale 4.5
Mole Creek 4.1
Ringarooma 3.5
Scottsdale 4.1
South Bushy Park 4.8

most significant natural resource A comprehensive list of all current Irrigation water requirements
advantage is water. Tasmania has 12 per Tasmanian irrigation projects can Irrigation water requirements depend
cent of Australia’s total water resource be found at: on soil type, climate, soil fertility and
on less than one per cent of Australia’s pasture species. The estimated annual
total land area, and its average annual irrigation requirements for well-
Water entitlements in these schemes
water run-off is almost twice that of the managed perennial ryegrass dairy
are typically priced at around $1 200
Murray Darling Basin in South Eastern pastures are shown in the table above.
per megalitre, with additional annual
Australia. Tasmania does not have the Irrigation of well-managed dairy pasture
charges which vary from scheme to
water supply constraints experienced with high soil fertility is likely to increase
in other parts of Australia and much of pasture utilisation by three to four
the world. More information is available at: tonnes of drymatter (tDM) per hectare and per year, and this will typically require
An ongoing priority in Tasmania is the around four megalitres per hectare per
completion of major irrigation schemes,
year of water to be applied12.
with the potential to double the water
available for irrigation. The Australian Farm irrigation
and Tasmanian Governments have Tasmanian dairy farmers are
committed $220 million to develop increasingly using irrigation to
irrigation schemes with at least 95 supplement rainfall and maintain
per cent reliability of water supply, in pasture production through summer
partnership with local communities and early autumn. Mostly this is based
around the state. Private sector on farm schemes utilising winter
investment of around $93 million is storage or direct take from rivers
also anticipated, which will double the and, in some areas, groundwater also
amount of irrigable land available for contributes to the total supply.
production purposes.

11. Macquarie Franklin, Farm Irrigation,

January 2012
12. Ibid
The dairy industry in Tasmania


Land affordability Also included is an analysis of some non-dairy farm sales

Tasmania has traditionally had lower land prices than where there is potential for conversion into new dairy
comparable dairy areas in Victoria and New Zealand. farms. Potential conversion farms include larger-scale beef
or cropping farms in the higher rainfall areas and lower-
The tables below summarise dairy farm sales over the priced properties in the lower-rainfall areas that have access
period 2012 to 2014. to a plentiful supply of irrigation water.

Dairy farm sales analysis: 2012–1413

Table 3: Farm area and total value

Region Number Farm area Farm price

of farms
Dry land Irrigated Bush / Total Land Improve- Total
pasture pasture waste ments1
(ha) (ha) (ha) (ha) ($m) ($m) ($m)

Circular Head 7 68 38 9 115 1.44 0.44 1.88

North west 4 70 32 24 126 0.83 0.45 1.28
North 3 76 70 17 162 2.20 0.63 2.83
North east 3 60 28 9 97 0.89 0.46 1.35
All dairy farms 17 68 40 14 123 1.33 0.48 1.81
Potential conversions 5 137 305 300 741 4.10 0.65 4.78

1. Includes irrigation equipment.

Table 4: Per hectare values14

Region Number Value per hectare Per total hectare Per effective
of farms hectare
analysed Dry land Irrigated Improvements2 Total farm2 Total farm3
pasture pasture1
($/ha) ($/ha) ($/ha) ($/ha) ($/ha)

Circular Head 7 13 690 13 580 3 270 17 600 18 600

North west 4 7 100 11 130 4 390 11 710 14 290
North 3 11 570 15 730 3 450 15 940 18 150
North east 3 7 790 11 550 4 740 13 940 15 260
All dairy farms 17 10 720 12 690 3 830 15 270 16 900
Potential conversions 5 6 430 9 330 1 090 7 890 10 990

1. Includes infrastructure and water.

2. Total value divided by total farm area – including bush/waste.
3. Total value divided by effective area (dryland plus irrigated pasture).

13. Opteon, March 2014

14. Opteon, March 2014
A guide for investors


Stock prices level is more closely related to feeding Also Friesian cull cows are worth more
The cost of livestock represents a (including concentrates) than it is to than Jerseys. However, there appears
significant proportion of the total breeding. The size of heifers at first to be little economic justification for the
investment in dairying. Dairy stock calving is also important. difference in prices between Friesians
prices vary over time depending on Breed and Jerseys. No relationship has yet
a range of factors, including: Friesian cows have traditionally been been determined between breed and
»» milk prices more expensive than crossbred or financial returns.
Jersey cows. In recent years, some
»» breed dairy farmers with Friesian herds have
In recent years there has been a
significant shift to crossbred cows, in
»» production history been able to sell replacement heifers
an attempt to correct herd health and
»» time of calving at premium prices to China and Russia.
Export markets occasionally exist for
fertility problems associated with large
»» seasonal conditions. Jersey and crossbred heifers. high-producing pure-bred Friesians.

Cattle prices can vary by as much

as 40 per cent from one season to
Table 5: Stock prices 2013–1415
another. The prices quoted in the table Type of stock Production Jersey Crossbred Friesian
below are a reflection of the 2013 –14 level
situation. (kgMS/hd) ($/hd) ($/hd) ($/hd)

Prices and demand for export dairy Dairy cows

stock vary depending on export orders. Spring calving >550 kgMS 1 700
Export cattle must meet relevant
selection criteria. Dairy stock that do >350 kgMS 1 300 1 400 1 500
not meet export selection criteria are <350 kgMS 1 000 1 100 1 200
subject to local prices.
Autumn calving >550 kgMS 1 800
Time of calving >350 kgMS 1 300 1 400 1 600
With the vast majority of the herds in
the state calving in the spring, it is often <350 kgMS 1 000 1 100 1 250
difficult for autumn-calving farms to Yearling heifers
source cows. Traditional autumn-calving
Local market 600 750 900
farms favour straight-bred Friesian cows
and generally run closed herds. Export market 850 1 600

Production history Heifer calves

Herds with production history, either Local market 350 500 650
at the factory or on the basis of farm
Export market 600 1 500
herd recording, tend to achieve higher
prices. However, per cow production Bulls 1 100 1 600

15. Macquarie Franklin, Stock Prices, 2014

The dairy industry in Tasmania


Agistment rates Typical costs for budgeting purposes Some of the variation in agistment
Dairy farmers in Tasmania often agist are outlined below. rates is due to the inclusion, or not,
young stock and dry cows off the main of animal husbandry practises such as
In some cases, yearling heifers are
farm, in order to maximise the number drenching and mineral supplementation.
charged on a weight gain basis until
of cows milked. The stock owner bares the cost of any
April/May and then go on to a per
drenches, mineral supplements and
Agistment rates for young stock vary. week basis of $12–$15 per head.
health treatments.
The quality of the job may also vary. It
has become popular for replacement
heifers to be agisted on a weight gain
basis, in order to reward the agistment
farmer for the result achieved and to Table 6: Typical agistment costs16
encourage the production of well- Type of stock Per week Per kg liveweight gain
grown heifers.
Cows $15.00–$20.00 NA
The price paid for winter agistment
Yearling heifers $8.00–$12.00 $1.30–$1.40
of dry cows can also vary depending
on location and season. Generally the Calves to 12 months $5.00–$7.00 $1.30–$1.40
cost will increase as the amount of feed Bulls $10.00 NA
allocated daily to the cow increases.
The cost of transport to and from
an agistment property should also be
taken into account.

16. Macquarie Franklin, Agistment Rates, 2014

A guide for investors


Biosecurity Infrastructure Natural gas is delivered via a gas

As an island state, Tasmania has a pipeline connecting Tasmania to
Transport and travel
clear biosecurity advantage. Tasmania’s mainland Australia. This provides
Tasmania has well-developed transport
biosecurity system is at the very core greater choice, flexibility and reliability
systems, encompassing sea, land and
of the Tasmanian brand, as its natural of energy supply to a multitude of
air travel. These provide fast and
environmental values and quality customers.
efficient links between the major
produce rely upon the state’s relative Tasmanian centres, mainland Australia Tasmanian businesses and residents are
freedom from pests, diseases and weeds. and international markets. Each guaranteed a safe, clean and reliable
The state is free of foot and mouth disease week, approximately 600 flights carry energy source. Importantly, the supply
and bovine spongiform encephalopathy passengers and airfreight into and out of of energy to Tasmania has never been
(BSE). the state. Qantas, Jetstar, Virgin Australia interrupted by industrial action.
and Tiger Airways all fly into the state
Sensing Tasmania (SenseT)
from many mainland cities, including
Research and development The SenseT project will see the
direct flights from Sydney, Melbourne
The Tasmanian Government, industry development of an integrated sensor
and Brisbane.
and the Tasmanian Institute of network across Tasmania for live, online
A dedicated freight rail system provides climate monitoring. The network will
Agriculture (TIA), work together to
transport for bulk freight. Tasmania has mesh together historical, spatial and
undertake research and development
a comprehensive road system linking real-time data, and make it available
programs. These are designed to
all of its major cities and towns, which through the web. SenseT has potential
address agricultural productivity, safe
provides access to rural areas suitable application in dairying through localised
food production and social and natural
for dairying. The relatively short distance weather observations and tools to
resource management issues. TIA is
between major centres and rural areas minimise weather-related risk. It also
home to the Dairy Centre, which
allows for commuting with minimal has the potential to monitor stock
provides dairy research, development
traffic congestion. movements, especially useful with the
and extension of international standard.
The state possesses four deep-water new robotic milking also being trialled
The Dairy Centre maintains a close in the state. There is also potential to
sea ports, located in Hobart, Burnie,
working relationship with Dairy Australia monitor pasture moisture content, in
Devonport and Bell Bay. There are
and DairyTas, and includes areas of work order to highly refine optimum stock
regular shipping services linking Tasmania
such as the following. conditions.
to Asia, Europe, the Middle East and
»» Feed production – the production North America, via other Australian
and consumption of pasture crops, ports.
grazing and harvesting management, Adaptive, flexible and
Two passenger, vehicle and freight ships,
water use efficiency and nutrient innovative workforce
Spirit of Tasmania I and II, provide daily
sailings across Bass Strait, linking the Tasmania has a strong agricultural
»» The factors affecting milk production north-west city of Devonport to the tradition, with skilled and innovative
– supplementary feeding, feed Port of Melbourne. primary producers, processors and
conversion, body tissue mobilisation, service providers.
milking frequency, genetic merit and Energy options
Tasmania’s energy network complements The Tasmanian workforce is readily able
developmental epigenetic effects.
the state’s natural environment. to adapt to meet demand and can offer
»» Management of the dairy investors stability, with an excellent
environment – synchronisation of The majority of Tasmania’s energy is industrial relations record.
fertiliser use with weather conditions, supplied by renewable hydroelectricity.
An undersea power cable linking Tasmanian training providers work with
plant demands and soil properties,
Tasmania with Victoria has provided local industry to ensure that industry
nutrient budgeting and management,
further competition to the Tasmanian training needs are met. They actively
and improvement of catchment
energy market and allows electricity to design national and international training
water quality.
be exported during high-priced peak programs for accreditation and ensure
The TIA Dairy Research Facility at demand periods, while still meeting that high-demand skills are created
Elliott is a fully operational 320 head the needs of electricity customers in within the state.
dairy farming operation and is home to Tasmania.
structured experiments on a wide range
of key industry issues.
The dairy industry in Tasmania


Government support Internationally, TIA is rapidly increasing The TFGA consists of five commodity
The Tasmanian Government is putting its research portfolio, influence and groups – Dairy, Meat, Wool, Agriculture
the state’s primary industries on the path student numbers. and Vegetable – as well as a number of
to achieving a tenfold increase in the committee groups including Cereal and
value of the sector by 2050. It recognises Seeds, Poppies, Environmental Policy,
TIA’s Dairy Centre provides research
that the development of the dairy Climate Change, Game Management,
services and support to the dairy
industry is important to the economic Native Vegetation, Water, Weeds and
industry. A website dedicated to
future of Tasmania and encourages Forestry.
informing the Tasmanian dairy industry
potential investors to investigate the about TIA’s activities offers a host of TFGA members lead each of these
benefits of dairy production and value resources and tools for innovative groups and regularly work with
adding in the state. dairy farmers. Australian and Tasmanian Governments on the wide range of issues that impact
Invest Tasmania
modern farming.
Invest Tasmania is the Tasmanian
Government’s investment promotion Industry support
and facilitation arm, which provides free Tasmanian Irrigation
confidential services and professional To capitalise on Tasmania’s comparative
DairyTas is the Tasmanian service
advice to investors. water advantage, Tasmanian Irrigation
delivery arm of Dairy Australia, Pty Ltd (TI) was established as a state-
investing farmer levies and other
funds to support the Tasmanian dairy owned company to progress a suite of
Department of Primary Industries,
industry. regionally significant irrigation schemes.
Parks, Water and Environment
The Department of Primary Industries, DairyTas’ main aim is to identify, TI’s board and staff provide the
Parks, Water and Environment promote, facilitate and leverage technical, financial and project
is responsible for the sustainable opportunities for research, management skills to take a $310
management and protection of development and extension activities in million suite of irrigation schemes
Tasmania’s natural and cultural the Tasmanian dairy industry, which will from concept, through feasibility,
assets for the benefit of Tasmanian assist dairy farmers to manage change. detailed design and approval stages,
communities and the economy. to construction and operation.
The DairyTas Board seeks to encourage
The department’s activities inform the the development of a sustainable and TI schemes are demand-driven
use and management of Tasmania’s land dynamic dairy industry in Tasmania that and constructed as public-private
and water resources. The department offers economic and social rewards to partnerships, to which the Australian
is also responsible for delivering the dairy farmers and those in the wider Government is contributing $140
services that support primary industry community. million, the Tasmanian Government
development, and for the protection $80 million and the private sector
of the state’s relative disease and pest- DairyTas provides small project grants $90 million, through the purchase of
free status. to assist regional groups, industry and fully tradeable water entitlements to advisors with local projects for the particular schemes.
dairy industry.
Tasmanian Institute of Schemes developed by TI deliver water
Agriculture at 95 per cent reliability. A significant
The Tasmanian Insititute of Agriculture Tasmanian Farmers and Graziers amount of this new irrigation will water
(TIA) works closely with its partners in Association (TFGA) dairy pastures around the state.
government and industry to improve The Tasmanian Farmers and Graziers
the performance of Tasmania’s Association (TFGA) is Tasmania’s
agricultural sector, across all industries farmer organisation, representing over
and value chains. TIA is recognised 5 000 members who live and work on
nationally and internationally for farm businesses across Tasmania.
its research excellence. It partners The TFGA is an active lobby group that
strategically with many other is owned and governed by farmers, for
organisations around Australia. farmers. Since its formation in 1948,
the TFGA has generated substantial
benefits for the agriculture sector.
A guide for investors


The Tasmanian brand The state is a natural larder, with Exports

Tasmania is globally recognised for clean air, unpolluted water and rich International dairy exports from
its pristine environment, as a tourist soils giving rise to the production of Tasmania totalled $107 million for the
location of historical and environmental 100 varieties of specialty cheeses, as year ended March 201217. Exports
significance, and as a producer of high- well as milk powders, butter and other were predominantly made up of milk
quality food and wine. dairy products. It also produces rock powder, cheese and butter.
lobsters, oysters, scallops and abalone,
Tasmania is an island of difference. Atlantic salmon, beef, premium beers, The Tasmanian Dairy Industry
Its people are resourceful, applying leatherwood honey, mineral waters, Authority (TDIA) is responsible for
the kind of creativity that arises from fine chocolates, fresh berries and stone the food safety licensing, inspection
geographical isolation to their business fruits, apples, vegetables and award- and auditing of dairy processors and
activities, scientific research and artistic winning cool-climate wines. dairy farms.
Other export products include
Tasmanian businesses are world essential oils such as lavender, Tasmania has food processing facilities
leaders in many areas of specialisation, pharmaceutical products and that are export licensed and Halal
including large-scale, high-speed premium wool that is sought after certified, which comply with the most
catamarans, marine evacuation gear, in Europe and Asia. stringent food safety requirements.
high-performance radio antennae and Exporting from Australia also
aquaculture equipment.
requires a licence from the Australian
Government Department of
Agriculture (DAFF).

17. International Trade in Goods and Services,

ABS Cat No 5368.0, Australian Bureau of
The dairy industry in Tasmania


Indicative costs of buying a dairy farm in Tasmania

Buying an operating dairy farm is the Depending on a range of factors, actual Management has a major role in both
way most people choose to enter the financial performance may be better pasture utilisation and labour efficiency.
industry. From that point onwards or worse than the examples outlined. It can also affect milk price to some
there are several options for expansion: Prospective investors should consult degree, through decisions on time of
widely before deciding on a specific calving, milk company chosen and by its
»» increase output on the current farm farm. impact on milk quality.
»» buy extra land A list of useful industry contacts has Pasture utilisation is a key profit driver.
»» sell up and buy a larger or more been provided on the back cover. The model farms outlined below are
productive farm. assumed to have 50 per cent dryland
Farm description and 50 per cent irrigated pastures with
This section outlines indicative budgets Managerial ability is the key factor in
for the purchase and effective running an average pasture consumption of 9.5
determining financial performance. tonnes of dry matter per hectare. This
of a dairy farm business in Tasmania, at The model farms here assume that
the present time. is a reasonable average and should be
management ability is above average. achievable on most farms with good soil
Farms for sale may range in size from The main profit drivers for dairy farms fertility and good pasture composition.
around 150 cows to in excess of 1 000. in Tasmania are:
It is generally accepted that a minimum The main assumptions are outlined in
herd size of around 200–250 cows »» pasture utilisation (and stocking the following table and explained below.
is required for a business to be fully rate)
viable at the present time. If past trends »» labour efficiency
continue, this number may increase
over time. »» milk price.
A guide for investors


Table 7: Farm descriptions18

Cows milked Number 250 500 750 1 000
Farm area
Total farm area ha 140 270 380 500
Total effective area ha 115 230 340 450
Irrigation area (50 per cent) ha 58 115 170 225
Milk production
Per cow kgMS 400 390 390 380
Total kgMS 100 000 195 000 293 000 380 000
Pasture consumed
Irrigated area tDM/ha 12.0 12.0 12.0 12.0
Dryland area tDM/ha 7.0 7.0 7.0 7.0
Average tDM/ha 9.6 9.6 9.6 9.6
Grain fed per cow t/cow 0.9 0.9 0.9 0.9
Labour required
Total units FTE 3.0 5.0 6.5 8.0
Cows per labour unit cows/FTE 83 100 115 125
Bare land value
Dryland $ per ha $12 000 $12 000 $12 000 $12 000
Irrigated1 $ per ha $17 000 $17 000 $17 000 $17 000
Capital investment
Land and improvements $ million $2.21m $4.70m $6.43m $8.43m
Stock $ million $0.49m $0.98m $1.48m $1.92m
Plant and machinery $ million $0.15m $0.20m $0.23m $0.35m
Working capital $ million $0.10m $0.18m $0.26m $0.33m
Total capital $ million $2.96m $6.10m $8.39m $11.03m
Per total hectare $ per ha $21 200 $22 500 $22 100 $22 100
Per effective hectare $ per ha $25 800 $26 400 $24 700 $24 500
Per cow $ per cow $11 900 $12 200 $11 200 $11 000
Milk price
Average for season $/kgMS $5.95 $6.00 $6.00 $6.00

1. Includes water and fixed irrigation infrastructure. Not including centre pivot, long laterals etc.

18. Macquarie Franklin, Buying a Dairy Farm, 2014

The dairy industry in Tasmania


Farm prices can vary considerably. The On the other hand, the 250 cow farm Pasture utilisation
values included here are reasonably has a relatively low-value herringbone Pasture utilisation is the most
representative of better farms sold in shed included in its improvements and significant driver of profit in
the past few years, and assume a bare- so has an overall capital per cow similar Tasmanian pasture-based dairy
land value of $12 000 per hectare for to the larger 500 cow farm with a systems.
dryland area and $17 000 per hectare rotary dairy.
Typically the best results are
for irrigation area (including water and
The average milk price is assumed to achieved by paying close attention
underground mains and other costs).
be around $6.00 per kg milk solids, to the pasture supply and demand
On the assumptions here, there is which is well below where prices situation, and making astute decisions
limited reduction in capital cost per are expected to finish up in 2013–14, about grazing management and
hectare or per cow as farm size and but are in line with the longer term supplementary feeding. Increasing
cow numbers increase. Any reduction is trend. They are shown to increase pasture utilisation by one tonne of
likely to come from spreading the cost by 5c per kg milk solids, between the dry matter per hectare (10 per cent)
of the milking facility over additional 250 cow and the other farms. The can make a significant difference to
hectares/cows especially with a rotary actual increase based on quantity overall profitability.
dairy (for example, 500 cows versus premiums should be higher than this,
Training in grazing management is
750 cows). but milk quality also needs to be taken
available through the Tasmanian
into account and it can be difficult to
Institute of Agriculture (TIA) and
maintain standards with larger herds.
assistance in on-farm implementation
and monitoring is available from
private consultants.
A guide for investors


Labour use Table 8: Wages cost19

Labour and feed are the most
significant cost inputs. Within the Number of cows 250 500 750 1 000
model farms, full time equivalents Labour required (FTE)
(FTE’s) have been used to define
labour requirements. This is the Owner operator 1.0 1.25 1.5 1.5
number of employees (including the
Other wages 2.0 3.75 5.0 6.5
manager) required to run the farm,
based on a 38 hour week. The budgets Total 3.0 5.0 6.5 8.0
assume that all labour (including the
owner/manager) is fully paid for. Cows per labour unit 83 100 115 125

In most instances, significant increases Wages cost

in disposable income can be achieved if
owners or share farmers elect to take Owner operator $60 000 $95 000 $100 000 $130 000
on a greater proportion of the work. Other wages $90 000 $169 000 $236 000 $293 000
Labour use efficiency is generally
Total $150 000 $264 000 $336 000 $423 000
measured as the number of cows
milked per FTE. The average is around Average cost per labour unit $50 000 $52 750 $51 750 $52 850
80 to 90 cows per FTE, but well-set up
farms can exceed 100 cows per FTE. Labour cost per kg milk solids $1.50 $1.35 $1.15 $1.10
Generally as farm size increases there
are labour efficiencies. These may
continue to increase with herd sizes
up to 1 200 cows.

19. Macquarie Franklin, March 2014

The dairy industry in Tasmania


Milk price Farming systems that have a reasonable Farm profit

The assumed milk price is $6.00 per stocking rate and typically feed up to Indicative profit budgets are outlined
kg milk solids, which is well below that one tonne of grain or pellets per cow for the four farms described.
expected in 2013–14 (possibly $7.00 can generally respond well to annual
per kg milk solids) but in line with the milk price variations. Farms with a Farm profit has been calculated as
longer term trend. Over time, the real heavy dependence on grain feeding earnings before interest and tax (EBIT)
(adjusted for inflation) milk price in can have more trouble coping when and as a return on total capital invested.
Tasmania has been relatively stable, but milk prices are low and/or grain prices Depending on the amount of borrowed
there has been considerable year-to- are high. The indicative budgets below capital, there will be an interest cost
year variation. allow for around 0.7 tonnes of grain fed to be deducted from the EBIT figure
per cow. to arrive at a net profit estimate for a
specific business. Also some operators
may choose to pay themselves less than
the commercial wages included in the
EBIT calculation shown here.
A guide for investors


Table 9: 250 cow farm20

Total Per effective Per cow Per kg
hectare milk solids
($’000) ($/ha) ($/cow) ($/kgMS)
Milk sales 595 5 174 2 380 5.95
Stock trading 27 238 110 0.27
Total income 622 5 412 2 490 6.22
Shed and cow costs 45 390 179 0.45
Feed costs 139 1 211 557 1.39
Tractor and plant operating 21 183 84 0.21
Repairs to structures and improvements 20 174 80 0.20
General overheads 15 130 60 0.15
Wages (including owner/manager) 150 1 304 600 1.50
Capital replacement (depreciation) 15 133 61 0.15
Total expenses 405 3 525 1 622 4.05
Earnings before interest and tax (EBIT) 217 1 887 868 2.17
Return on capital (ROC) 7.3 per cent

Table 10: 500 cow farm21

Total Per effective Per cow Per kg
hectare milk solids
($’000) ($/ha) ($/cow) ($/kgMS)
Milk sales 1 170 5 087 2 340 6.00
Stock trading 55 239 110 0.28
Total income 1 225 5 326 2 450 6.28
Shed and cow costs 90 389 179 0.46
Feed costs 270 1 176 541 1.39
Tractor and plant operating 31 134 62 0.16
Repairs to structures and improvements 30 130 60 0.15
General overheads 25 109 50 0.13
Wages (including owner/manager) 264 1 147 528 1.35
Capital replacement (depreciation) 20 86 40 0.10
Total expenses 729 3 171 1 459 3.74
Earnings before interest and tax (EBIT) 496 2 155 991 2.54
Return on capital (ROC) 8.2 per cent

20. Macquarie Franklin, March 2014

21. Macquarie Franklin, March 2014
The dairy industry in Tasmania


Table 11: 750 cow farm22

Total Per effective Per cow Per kg
hectare milk solids
($’000) ($/ha) ($/cow) ($/kgMS)
Milk sales 1 755 5 162 2 340 6.00
Stock trading 82 242 110 0.28
Total income 1 837 5 404 1 966 6.28
Shed and cow costs 134 395 179 0.46
Feed costs 416 1 222 554 1.42
Tractor and plant operating 41 119 54 0.14
Repairs to structures and improvement 40 118 53 0.17
General overheads 50 147 67 0.19
Wages (including owner/manager) 336 989 448 1.15
Capital replacement (depreciation) 23 67 30 0.08
Total expenses 1 039 3 057 1 386 3.55
Earnings before interest and tax (EBIT) 798 2 347 1 064 2.73
Return on capital (ROC) 9.5 per cent

Table 12: 1 000 cow farm23

Total Per effective Per cow Per kg
hectare milk solids
($’000) ($/ha) ($/cow) ($/kgMS)
Milk sales 2 280 5 067 2 280 6.00
Stock trading 107 237 107 0.28
Total income 2 387 5 303 2 387 6.28
Shed and cow costs 179 397 179 0.47
Feed costs 552 1 227 552 1.45
Tractor and plant operating 41 90 41 0.11
Repairs to structures and improvements 50 111 50 0.13
General overheads 50 111 50 0.13
Wages (including owner/manager) 423 939 423 1.11
Capital replacement (depreciation) 35 77 35 0.09
Total expenses 1 329 2 953 1 329 3.50
Earnings before interest and tax (EBIT) 1 058 2 350 1 058 2.78
Return on capital (ROC) 9.6 per cent

22. Macquarie Franklin, March 2014

23. Macquarie Franklin, March 2014
A guide for investors


Farm summary The slight increase in capital investment per cow between
A comparison of the four farms is provided in the table below. the 250 cow and the 500 cow farms is associated with a shift
in the type of dairy, from a herringbone to a rotary shed.
The analysis shows the potential for return on capital
The cost per hectare falls after 500 cows, with the nominated
increases with increasing farm size. This is due mainly to a
50 bale rotary dairy able to milk up to 1 000 cows.
relative reduction in the cost of labour, plus a slightly lower
capital outlay per cow.

Table 13: Farm summary24

Cows milked Number 250 500 750 1 000
Capital investment
Total $million $2.96m $6.10m $8.39m $11.03mm
Per cow $ $11 900 $12 200 $11 200 $11 000
Pasture consumed tDM/ha 9.6 9.6 9.6 9.6
Irrigation per cent 50 50 50 50
Grain fed t/cow 0.9 0.9 0.9 0.9
Labour requirement
Total units FTE 3.0 5.0 6.5 8.0
Cows per unit cows/FTE 83 100 115 125
Milk price $/kg MS $5.95 $6.00 $6.00 $6.00
Return on capital 1
per cent 7.3 8.2 9.5 9.6

1. Return on capital (EBIT) before capital appreciation.

24. Macquarie Franklin, March 2014

The dairy industry in Tasmania


Dairy conversion opportunities

There is potential in Tasmania to create There is only one milk company on Deloraine area, to properties along the
new dairy farms by converting current the island, which is King Island Dairies, Meander River and via four pipelines
grazing or cropping farms into dairy owned by Lion (previously National installed in 2010 (Caveside, Rubicon,
units. Foods) and its requirement for Quamby and Hagley).
Ideally a potential dairy conversion additional milk will be a key factor The Northern Midlands is also
property will have the potential to milk in any proposed investment. reasonably prospective, with larger
500 or more cows. It will be in either Far north west properties, relatively flat topography
the traditional higher-rainfall areas, or There is reasonable scope for dairy and with the current and ongoing
in lower-rainfall areas with access to a conversions in the far north west irrigation development in the area.
plentiful supply of irrigation water at a (Circular Head municipality), including Several dairy conversions have already
reasonable cost. some large beef properties. The climate been undertaken in recent years.
The advantage of dairy conversions over is ideal for dairying with good rainfall The availability of irrigation water
existing farms is that there is more scope distribution and limited frosts. from new schemes being developed
to have a fully functional farm with new The far north west is considered the by Tasmanian Irrigation will open up
infrastructure, situated in the right place. best dairying region in Tasmania and as additional potential in the Midlands and
In addition to this, the scope to grow a result it is already a well-developed Northern Midlands over the next few
over time can be built in upfront, rather dairy area. Some conversions may years.
than hoping that adjoining properties need to include several adjoining North east
come onto the market over time. properties. Some of the land in the The north east (Dorset municipality)
There is a substantial amount of land district, particularly on swamp ground, is already one of the three main
available in Tasmania suitable for would require drainage as part of the dairying areas in the state, and there
conversion to dairying. Tasmania is conversion process. are opportunities to develop further,
also one of the few states which has with large areas suited to dairying
Central north west
a government water development with the aid of irrigation. Tasmanian
strategy in place and is encouraging This area has limited scope for dairy
conversions because of the small size Irrigation has recently completed
farmers to develop water resources for the Headquarters Road dam in the
agricultural purposes. New irrigation of many of the properties. There is
competition for the better land from Scottsdale area plus an expansion of the
schemes currently being developed by Winnaleah Irrigation Scheme. There
Tasmanian Irrigation have the potential intensive horticulture operations. Base
land prices are generally higher than in are also further schemes currently
to open up new land for dairying. being assessed.
other prospective areas.
Subject to water management plans As well as the traditional inland dairy
and maintenance of environmental flow Central north
areas on the better-class clay loam soils,
requirements, it is also possible to obtain There is a significant area of land there is also potential for large-scale
new water rights for winter-take into suitable for converting to dairy in dairy development on some of the
storage. Alternatively, it is possible to the central north. Large properties sandy and sandy loam soils closer to the
buy or lease existing water rights from currently running extensive cropping coast. While the soils are not as naturally
other farmers or buy water from them and livestock are well-suited to dairying. productive, winter temperatures are
directly. Rainfall in this region varies considerably higher with very few frosts. In recent
Conversion opportunities currently lie in and will need to be taken into account times, many of these properties have
the following areas of the state. when selecting a potential dairy farm. installed irrigation (usually pivots) to
Many of the farms have large historical grow crops such as potatoes and
King Island
water rights. Irrigation requirements poppies. Some of the soils are not
There are large tracts of land suitable are also relatively high, due to lower robust enough to withstand continuous
for conversion to dairying on King summer rainfall (in some areas) and cropping, but are well-suited to grazing
Island. There are variations in soil type high evapotranspiration rates. and hence dairy farming. In some
and rainfall across the island that need instances, there may be the need to
to be taken into account. Drainage, soil The Meander Dam was completed in
2008 and has the capacity to provide combine farms to get to commercially
fertility and a few pockets of salinity are viable sizes, however there are also
potential issues. an additional 23 900 megalitres in the
many larger farms in the area.
A guide for investors


Derwent Valley Potential returns from The financial models assume that the
There are large properties along dairy conversions management deployed within the
the Derwent River with significant system is average or above. Hence
The following tables provide some
water rights that would be suitable so too is financial performance.
indicative figures as a guide to
for conversion to dairying. The area Significant capital expenditure is
has some of the warmest summer included in the models to provide a
There are many variables to consider solid platform for good performance.
temperatures in Tasmania. With the
in undertaking a dairy conversion, so
aid of irrigation and increased soil The conversion farm is assumed to
potential investors wishing to go further
fertility are capable of excellent pasture be in a lower-rainfall non-traditional
should consult widely.
production. area of the state. Conversion is
Local sources suggest that some of the A list of useful industry contacts has assumed to require purchase of a
better land lies away from the river been provided on the back cover. water right, at a capital cost of $1 300/
and therefore water may need to be Assumptions megalitre, sufficient to irrigate around
pumped or transferred over some 50 per cent of the total effective area.
The financial models used to assess the
distance. There are also good alluvial Alternatively, if the farm already has
financial viability of dairy conversions
soils along the river itself. water and irrigation infrastructure,
use a number of assumptions that
the base price will be higher and
At the present time, there is only one underlie the results shown.
the conversion cost will be lower.
processing company buying milk from The key factor in achieving a good Replacements are assumed to be
this area (Lion). result is the ability of the manager. run off-farm and limited grain input
South of Hobart Important profit drivers include: (around 0.7 tonne per cow) is used.
There is very limited potential to »» initial capital cost At $6.00 per kg milk solids, the
convert land to dairy farming in the »» pasture utilisation per hectare assumed milk price is well below the
area south of Hobart. (and stocking rate) price for 2013–14 which is expected
to approach $7.00 per kg milk solids.
»» labour efficiency and However, it is in line with the longer
»» milk price. term trend.
The main assumptions are outlined
in the following table and explained
The dairy industry in Tasmania


Table 14: Farm conversion assumptions25

Cows milked Number 700 1 000
Farm area
Total farm area ha 330 475
Total effective area ha 297 428
Irrigation area (50 per cent) ha 149 214
Milk production
Per cow kgMS 375 375
Total kgMS 262 500 375 000
Pasture consumed 1

Irrigated area tDM/ha 12.0 12.0

Dryland area tDM/ha 6.0 6.0
Average tDM/ha 9.0 9.0
Grain fed per cow t/cow 0.7 0.7
Labour required
Total units FTE 6.4 7.7
Cows per labour unit cows/FTE 110 130
Cost per kg milk solids $/kgMS $1.26 $1.09
Bare land value
Dryland $ per ha $6 000 $6 000
Irrigated 2
$ per ha - -
Capital investment
Land and improvements – initial $ million $2.12m $3.11m
Water purchase $ million $1.06m $1.53m
Irrigation development $ million $0.67m $0.96m
Rotary dairy 3
$ million $1.15m $1.45m
Other farm improvements 4
$ million $0.70m $0.97m
Stock $ million $1.38m $1.98m
Plant and machinery $ million $0.25m $0.27m
Working capital $ million $0.26m $0.35m
Total capital $ million $7.60m $10.61m
Per total hectare $ per ha $23 000 $22 300
Per effective hectare $ per ha $25 600 $24 800
Per cow $ per cow $10 900 $10 600
Per kg milk solids $ per kgMS $28.95 $28.30
Milk price
Average for season $/kgMS $6.00 $6.00

1. Overall pasture utilisation here is assumed to be slightly less than for a current farm in a more traditional area. Higher figures
are achievable.
2. None purchased. Water purchase and irrigation development are assumed to be part of the conversion process.
3. Includes all equipment, milk silo, grain silos and feeding system, power installation, effluent system, and tanker access road.
4. Includes extra house, calf shed, fencing, laneways, water supply, capital fertiliser and pasture renovation.

25. Macquarie Franklin, March 2014

A guide for investors


On a per-cow basis, the total capital Also, see the section on ‘buying a farm’, However, it should also be borne in
investment indicated here is similar with above average farms with total mind that a new dairy farm conversion
to that required to buy an equivalent assets of $11 000 to $12 000 per cow might take two or three years to reach
currently operating dairy farm on a with all replacements reared on-farm its potential. In order to give a better
walk-in-walk-out basis. For example, (this increases the per cow figure). reflection of the longer term situation,
the Tasmanian Dairy Business of the the financial returns outlined assume
In addition a fully set up new dairy
Year results for 2012–13 show on that three years have passed since the
conversion farm should be ‘state of
average farm assets of $10 545 per conversion took place. Income may be
the art’ and therefore perform better
cow over 35 farms. For the top less and costs higher in the earlier years.
than an average farm, especially from a
25 per cent the figure was $9 587.
labour point of view.
The dairy industry in Tasmania


Dairy conversions return on capital The indicative budgets suggest some The costs and returns outlined below
The financial performance of the model economies of scale associated with are intended as indicative examples
conversion farms is summarised below. the larger farm. This is associated with only. All potential dairy conversions
For a 700 cow conversion, the model better utilisation of expensive farm have individual circumstances and
suggests an 8.2 per cent return on infrastructure and an assumed higher should be fully assessed on an
capital before interest and tax (EBIT) labour efficiency with the larger farm: individual basis.
before any capital gain. For the 130 cows per FTE for the 1 000 cow
1 000 cow conversion, the model farm versus 110 cows per FTE for the
shows a 9.2 per cent return. 700 cow farm. However, managerial
requirements are higher for a 1 000
cow farm.

Table 15: Dairy conversion investment – indicative returns26

Cows milked 700 1 000
Capital invested
Total $7.60m $10.61m
Per effective hectare $25 600 $24 800
Per cow $10 900 $10 600
Per kg milk solids $28.95 $28.30
Income $’000 $’000
Milk sales 1 575 2 250
Stock trading 74 107
Total income 1 649 2 357
Expenses $’000 $’000
Shed and cow costs 128 183
Pasture and feed costs 444 626
Tractor and plant operating 30 40
Wages 330 409
Repairs to structures and improvements 35 50
General overheads and insurance 35 50
Capital replacement (depreciation) 25 27
Total expenses 1 027 1 384
Profit (EBIT)1 623 972
Return on capital (ROC) 8.2 per cent 9.2 per cent

1. Earnings before interest and tax.

26. Macquarie Franklin, March 2014

A guide for investors

The dairy industry in Tasmania

Investment regulations and business entry

Investment approvals Purchase of all land, including rural land, Entry to Australia
The Australian Government’s foreign is regulated by the Foreign Investment The Australian Government provides
investment guidelines recognise the Review Board (FIRB). At the time of several visa options for overseas
substantial contribution that foreign writing, rural land purchases of less business people and investors to enter
investment has made and continues to than $248 million do not require FIRB Tasmania. These include short-stay visas
make to the development of Australia. notification. More information, allowing exploratory visits and business
including the definition of ‘rural land’ meetings, through to visas providing
The administration of foreign and monetary thresholds, is available permanent residency.
investment policy is based on guidelines from the FIRB website at:
rather than inflexible rules. It is both
practical and non-discriminatory.
Proposals by foreign companies to
establish new businesses may require
prior approval and government
notification, under the Australian
Government’s foreign investment
A guide for investors

Assistance for investors

Australian Government Tasmanian Government »» insights on business costs, skills,

assistance assistance availability, taxation and research
The Australian Government offers Invest Tasmania is the Tasmanian opportunities
a range of assistance for businesses Government’s investment promotion »» expert advice on Tasmania’s
wishing to establish in Tasmania. and facilitation arm, which provides free industry capabilities and strengths
confidential services and professional
AusIndustry advice to investors, including:
»» site visits to identify suitable
AusIndustry delivers programs on locations in Tasmania for business
behalf of the Australian Government »» dedicated project teams and case »» links with potential partners
to help existing and new Australian management
businesses innovate, grow and succeed. »» connections with local industry »» connections with infrastructure and service providers
associations and government
departments »» information on industry strategies.
The Australian Trade Commission »» information on business
(Austrade) is the Australian opportunities, investment
Government’s trade and investment regulations and government
development agency. Austrade assists assistance
Australian companies to succeed
in international business, attracts
productive foreign direct investment
into Australia and promotes Australia’s
education sector internationally.
Invest Tasmania
GPO Box 536 Hobart TAS 7001 Australia
Phone: +61 1800 030 688

Phone: +61 3 6432 2233 (International)

Department of Primary Industries,

Parks, Water and Environment
Phone: 1300 368 550 (Australia)
+61 3 6233 8011 (International)

Tasmanian Institute of Agriculture

(TIA) Dairy Centre
Phone: +61 3 6430 4915 (International)

Tasmanian Farmers and

Graziers Association
Phone: 1800 154 111 (Australia)
+61 3 6332 1800 (International)

Invest DairyTas IntoDairy