![Murray Goulburn’s shareholder relations general manager Robert Poole. Murray Goulburn’s shareholder relations general manager Robert Poole.](/images/transform/v1/crop/frm/silverstone-agfeed/2065098.jpg/r0_0_1024_682_w1200_h678_fmax.jpg)
AUSTRALIA'S farm sector needs two key ingredients to thrive during the next 20 years - new investment for family farms, and milk.
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The Murray Goulburn co-operative estimates every Australian would be, on average, more than $800 better off today if the nation's dairy farmers hadn't quit the industry in droves during the past decade.
Instead of maintaining a respected 15 per cent share of global dairy export markets, Australian milk production slipped 1.7pc annually, despite a big surge in world dairy product demand in the past five years.
We now supply just 7pc of the international trade.
Across the Tasman Sea, New Zealand has done the opposite, converting beef and sheep country into dairy farms and growing its annual production by about 3.5pc.
NZ's share of the global milk product trade is now 37pc - up from a stake similar to Australia in 2002.
Milk exports are now turbo-charging the Kiwi economy with the sort of growth experienced by Australia in the recent mining boom, including pushing the value of the NZ dollar to 40-year highs.
Growth in demand for dairy foods is forecast to be more than double that of the next two fastest growing food categories combined by 2020, dragged along largely by demand from China.
Chinese imports of dairy foods were worth just $309 million in 2001, but by last year had soared to $US6.2 billion.
"Dairy is truly an amazing story of growth. It really is so huge," said Murray Goulburn's shareholder relations general manager Robert Poole.
"Unfortunately we have not been in a position to take advantage of it, but NZ saw the chance and grabbed it."
A difficult decade of drought, milk market deregulation, a rising Australian dollar, and low farmgate milk returns eroding farmer confidence levels, had convinced many producers to stop milking, sell their farms, sell irrigation water rights, or semi-retire.
"We need to reverse the trend and get farmland back into dairy production," Mr Poole said.
He said a 3.5pc compound increase in annual production would deliver an extra $5b a year to the national economy from export earnings by 2020.
To reclaim 15pc of the global trade by 2030 would bring in $11b - equivalent to an extra $824 per capita every year.
Mr Poole admitted it was an "incredibly audacious goal", but his farmer-owned co-operative - arguably Australia's biggest food business - was determined to do its bit to encourage as much production growth as possible.
A key plank in Murray Goulburn's (MG) strategy is to promote growth by providing farmgate pricing confidence to its expanding supplier network in NSW, Victoria, Tasmania and South Australia.
This trading year MG suppliers would be paid 50 cents a litre - a near record - and the company's objective was to increase its milk price by a further 7c/L (equivalent to $1kg for milk solids) to encourage a turnaround in supply volumes.
"We can create so much more income per hectare from dairy cows than from sheep or beef cattle - we've got to get the land lost in the past decade back in production," Mr Poole said.
Research by corporate consultancy Port Jackson Partners estimated dairying needed about $16b in new capital funds for Australia to regain its lost export market share by 2020.
However, a major hurdle to farm productivity growth was the long tradition of funding farm expansion with borrowed money.
MG believed the most obvious alternative to blowing out farm debt even further was to encourage outside equity into farming, particularly when farmers needed to more land to lift production.
Since 2011 a partnership program co-ordinated by the big co-operative has increased milk production by up to 28m litres a year by drawing in $20m in European equity to pay for farmland acquisitions adjacent to or nearby existing MG suppliers in Victoria.
Mr Poole said superannuation investment groups now owned land which was leased at market rates direct to nine highly credible farming family operations.
The deals provided fund managers with solid annual returns and long-term land value gains, while the farmers were able to limit their borrowings to funding new machinery and buying more cows.