Victorian dairy industry at risk under Basin Plan buybacks says the UDV

UDV president Bernie Free said data used by the commonwealth to justify its transition support in the face of water buybacks did not go far enough in demonstrating the real impact on milk production in northern Victoria.

"The commonwealth's Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) report, found if they buy 225,000ML of water there would be $110 million lost each year in production," Mr Free said.

But that was a substantial underestimation, he said.

"Firstly, ABARES underestimated the volume to be purchased by 45 per cent," he said.

"Secondly, ABARES did not calculate the costs of lost dairy processing jobs (or) the additional cost to dairy of having even less water when the next drought strikes."

Mr Free said dairy had not been analysed as an industry on its own.

"Rather, it's been grouped with all those producing pastures," he said.

"This failure means impacts on dairy water use have not been accurately assessed.

"The flow-on impacts of less milk to dairy manufacturers have also been omitted, meaning we are not seeing the full picture of how these buyback scenarios will affect the dairy industry, related communities and the wider economy," Mr Free said.

The dairy industry employed close to 3000 people on farms and 3500 in dairy processing across 11 factories and a further 6200 people work in related dairy industry activities across northern Victoria.

"Nowhere else in Australia do we have this number of dairy processors," he said.

It comes at a time when the dairy sector is being squeezed by high input costs and lower opening milk prices.

Tongala, Vic, dairy farmer Andrew Tyler said water buybacks were a "major threat" to dairy farmers in northern Victoria and the southern Riverina.

"It's going to have a massive impact on dairy processing, which is a lot of jobs," he said.

"The issue is, at this point in time, we don't know where the targeted water is going to come from.

"As an irrigator, my greatest concern is if they take another 20 per cent out of our district it's probably going to add 15 per cent minimum cost, per year, to our businesses to maintain those irrigation districts.

"The remaining farmers who want to continue are going to face severe impacts, obviously through less water being delivered."

As farmers left the industry, there would be less milk produced, having an impact on processors, he said.

It was a major cost and would also have an impact on confidence for the remaining farmers.

While some farmers might be willing sellers of water, it could result in a 'swiss cheese' effect, which meant Goulburn-Murray Water would still have to run the complete system, to service farms that were left.

"If it is not targeted it can create a lot of extra cost to G-MW and the water rate payers, who are the farmers," he said.

The government was putting out "a lot of misinformation" about the Basin Plan.

"I would be cynical and say this ABARES report was probably put together very quickly by some bureaucrats, who don't have a full understanding of the impacts of what is being proposed," he said.

Cohuna, Vic, dairy farmer Kelvin Matthew said the impact of previous buybacks on communities were "definitely" being felt.

"Everything is on the decline, you only have to look at the sporting clubs, it's a struggle to get juniors because families have just gone," Mr Matthews said.

"It all revolves around water - water creates jobs, water creates opportunities, without it, they're gone."

He said researchers should look at the impact of previous buybacks and use the information that was already available.

Mr Matthews said he had set up his operation to farm with less water.

"There are other ways to feed cows, we do need water to a certain extent, but our business model is not reliant 100 per cent on it," he said.

ABARES has been contacted for comment.