Dairy producer Murray Goulburn has bought water to help Victorian dairy farmers through the current dry spell and warns the year ahead could be difficult if the drought continues.
Managing director Gary Helou says the co-operative has secured about 9,000 megalitres of water from a couple of superannuation funds that had invested in water rights.
"We're making that available to our northern Victorian farmers/suppliers on the basis of an offer price. We have a menu of prices," Mr Helou told reporters on Monday.
"It's another way we help our farmers recruit some of the inputs in what's going to be a difficult year if the drought continues."
Chairman Philip Tracy earlier on Monday told shareholders at the company's annual general meeting that the current dry conditions arising from the El Nino weather pattern were a concern.
Experts predicted the El Nino would peak around the end of this year before weakening rapidly in autumn 2016.
But strong farmgate milk prices over the past couple of years meant that most dairy farmers were well placed to manage the dry spell, Mr Tracy said.
Farmers were taking the opportunity to manage their herds, with older and less productive cows fetching good prices at market.
Farm input costs - except for irrigated water - had not risen significantly during the year, and fodder was in good supply.
And, Murray Goulburn could help farmers with loans for various inputs, including water purchases, he said.
Mr Helou told shareholders that dairy commodity prices appeared to have bottomed as producers cut production and supply tightened.
Since August, they had risen about 60 per cent.
"We believe dairy commodity prices have bottomed and will trend higher over the financial year," Mr Helou said.
He confirmed that Murray Goulburn expected to pay a farmgate price of $6.05 per kilogram of milk solids in the current financial year, and the group was targeting an annual net profit of $86 million in 2015/16.
However, that was conditional upon dairy commodity prices continuing to materially strengthen during the balance of fiscal 2016.
Securities in the MG Unit Trust, a special purpose funding vehicle linked to the Murray Goulburn dairy co-operative, dropped three cents to $2.26.
