Victorian Farmers Federation (VFF), Media Release, 11 June 2025
The Victorian Farmers Federation (VFF) says a Ricardo report commissioned by Dairy Australia raises serious concerns over the future of the dairy industry, with water buybacks potentially leading to a further 270 million litre decline in milk production.
The report reveals that Southern Basin dairy farmers could face individual losses of up to $430,000, while milk processors stand to lose up to $500 million in revenue due to reduced dairy product availability.
VFF Water Council Chair and northern Victorian dairy farmer Andrew Leahy has labelled the report as a ‘wake-up call’ for the future of the industry and says the industry’s enormous economic contribution is under threat.
“This is the first report to comprehensively assess the impacts across the entire dairy supply chain, from the farm to the processor and the broader community.”
“What it shows is deeply concerning: the Basin Plan is eroding our ability to produce food. When water is taken from agriculture, it’s not just the farmers who suffer, it’s the entire food production system in the Southern Basin and the massive economic contribution the industry makes,” Mr Leahy said.
The report also highlights how water buybacks are exacerbating water scarcity. These buybacks not only reduce the amount of water available to farmers, but they also inflate water prices, placing additional financial strain on producers.
“Water allocation prices could soar by as much as 40 per cent in dry years.”
“The current price for allocation water in the Murray region is $180 per megalitre. With water buybacks, that price jumps to $252. In extreme drought conditions, like those we saw in 2019, that same water price could skyrocket to $840 per megalitre, a 40 per cent premium,” Mr Leahy said.
The consequences of the Basin Plan’s pain is already apparent. According to the Frontier Economics report of 2022, the dairy sector has already lost 400 million litres of milk production from 2012-2022.
With an additional 270 million litres at risk due to ongoing water buybacks, this amounts to nearly 800 million litres of milk that has been displaced from the market in just over a decade.
Northern Victoria is the largest dairy-producing region within the Murray-Darling Basin and is especially vulnerable. The region produces 1.476 billion litres of milk annually, representing 80 per cent of the Basin’s total dairy output.
United Dairy Farmers of Victoria (UDV) President Bernie Free said the report makes for concerning reading.
“The dairy industry is the lifeblood of rural communities across northern Victoria.”
“It supports 3,000 farm jobs and over 3,500 jobs in dairy processing across 11 factories. Additionally, more than 6,200 people are employed in related industries. A reduction in milk production is a direct hit to these communities, putting livelihoods and local economies at risk,” Mr Free said.
Mr Leahy said the findings of this report highlight the urgent need for the Federal Government to acknowledge the detrimental effects of water buybacks.
“We cannot afford to ignore the long-term impacts of the Basin Plan any longer.”
“We need action to protect both our water resources and our food production capabilities before it’s too late,” Mr Leahy said.
