THE management skills required to run a dairy farm during the price downturn could be the key to making money from milk in the future.
During the past 18 months, many dairy farmers had to run their businesses with the lowest possible costs to try to match the farm-gate milk price, which in many cases was below the cost of production.
Dairy consultancy business Red Sky Agricultural managing director David Beca said the skills that managers developed from this downturn would help them maintain a lower cost structure for the future.
This could help farmers capitalise on improved prices this season.
"Continue to keep a tight rein on costs and produce extra milk where possible" Mr Beca said.
"(It's) always a challenge (when) people are offering ways for us to spend our money."
Across Victoria, the southwest enjoyed one of the best autumn for a long time and further north the season has improved compared to recent years.
Mr Beca said dairy farmers had been able to take more grass into the winter, which helped decrease the cost of production at a time of year when producing milk could be expensive. This trend of lower milk production costs should continue as farmers take advantage of milking on a cheaper diet that includes more pasture, less reliance on bought-in feed and cheaper feed prices.
"Grain ... hay and silage (are) lower than the long-term-trend line and milk price looks like it will be above the trend line," Mr Beca said.
NAB southern and western head of agribusiness Neil Findlay said it was important for farmers to budget for two circumstances this season.
"The first step is to develop a worst and best-case cash-flow forecast and budget," he said.
"A cautious approach is always best and, although there is room for some upward movement in the prices, it is never a good idea to over-budget."
Many farmers had deferred capital expenditure during the the past season because of the lower farm-gate milk price and Mr Findlay said this "could not happen forever".
It's expected that any additional money this season would be used to catch up on maintenance, while Mr Findlay said farmers may also repay debt, put funds aside for "tougher times" and build up herd numbers.
