YEARS of drought and low milk prices has made for a capital shortage with the Australian dairy industry in recent years.
Challenging years have led to increased debt loadings on dairyfarms, which is why South Australian Dairyfarmers Association president David Basham believes there needs to be work done to try and find a way to help farmers stabilise their income from year to year.
"It might be milk price, but it also might be managing milk price in high years versus managing it in low years," he said.
"I think it would be good if we could stabilise the pricing somehow and whether it is possible is hard to know because it's reliant on the large exporting companies doing something in this space.
"Their risk is stabilising the price in a low year. It puts their business at risk by exposing them to high debt levels, particularly if the cycle takes longer to correct itself.
"It's a matter of finding the right levels of risk for all members of the chain so we can all make longer-term business decisions."
Mr Basham said it was important to educate banks that dairy was a cyclical industry.
"They need to understand they need to be prepared to ride the lows and we as dairyfarmers need to be prepared to repay debt during the highs," he said.
While lack of capital is top of the list of issues dairyfarmers are facing, Mr Basham says there are many other things affecting them.
"There's certainly the common things of having a competitive advantage over other parts of the world like getting good trade access to places like China and Korea and to actually give Australia the opportunity to compete on a more competitive footing," he said.
* Full report in Stock Journal, August 29 issue, 2013.