There is a drought spreading across eastern Australia and while it is severe it is not our worst. At least not yet.

There are two major droughts which are stuck in the Australian psyche.

The 1895 to 1902 Federation Drought, during which the Darling and Murray Rivers ran dry, and the Millennium Drought which ran from late 1996 to mid-2010 and severely affected most southern cropping areas.

In southern parts of Australia, droughts of the late 20th and early 21st centuries have been found to be the worst in the last 400 years, and experts predict they will become more prevalent in the future.

For some farmers, the millennium drought was a turning point where they realised that if they wanted to keep farming in Australia they needed to embrace rather than battle an often unpredictable climate.

Dams are drying out in drought stricken parts of Australia. ( Landline: Ben Deacon and Marty McCarthy )

Spending money when there is none

In NSW's central west, farmers Laurie and John Chaffey have seen and read the stories about farmers in drought shooting starving livestock that they cannot afford to feed.

The Chaffeys don't ever want to be in that position, and that meant being prepared for this drought and future ones.

"We have never considered [culling], it's not something that we'd do, and it's not really a good outcome we feel for our industry at all," Ms Chaffey said.

They are reducing their cattle herd by half and instead focusing on looking after their ewes, which is critical given they are all about to lamb.

The Chaffeys said they came up with a plan in November to preg-test their cows and anything not in calf went, even though they were loved dearly. ( Landline: Marty McCarthy )

Cash flow is low at the moment, but the Chaffeys are investing in building drought lots — small pens where the mothers can give birth and still have access to plenty of food and water.

"You have got to have ewes in a good condition that they want to stay with the lamb and not toddle off where it's dropped," Mr Chaffey said.

"The lots will increase our lamb survival, so at the end we'll hopefully have a good lambing percentage and we'll protect the ewes with good nutrition.

"It's our way of managing this drought, it's something we have been thinking about doing for a long time but have never done in our 40 years of farming," Mr Chaffey said.

Keeping all of their sheep in drought lots rather than in the paddocks means the pasture will grow back faster when it rains.

It also means the Chaffeys don't have to sell as much stock, which will help them bounce back quicker when the drought breaks. Their sheep-stocking rate is high, despite the drought, at 80 per cent.

Sheep eating grain on a drought affected property in New South Wales ( Marty McCarthy )

The Chaffeys livestock nutritionist, Nikki Henderson, says she wants to see more farmers in drought-affected areas plan ahead to avoid having animals starving in paddocks.

"This is definitely [an] uncommon thing for this area but it's great what the Chaffeys are doing," she said.

"I've spent a lot of time in Victoria and South Australia and other areas and I see a lot more people setting up this sort of drought-lotting infrastructure for lambing and drought feeding."

In addition to the new drought lots, the Chaffeys also have two sheds full of hay, and three years ago installed silos to store grain as well as grain they wrapped in plastic and buried 20 years ago.

"Every drought is different and it is all about compromise and adjustment, the further you get the further you need to think about how you can prepare next," Mr Chaffey said.

Figures from the Department of Primary Industries show that all of NSW is affected by the dry conditions, and almost one-quarter classified as being in 'intense drought'. ( Landline: Marty McCarthy )

Ms Henderson, who has clients throughout the central west, said many people are still holding out for rain rather than putting a long-term feeding strategy in place.

"There are people out there that I'm going to see who you set up with plans and talk about costs to feed through calving and they are still sitting back waiting and not planning ahead far enough to budget those feeds," she said.

Heidi Austin, a district vet with North West Local Land Services, said it can be difficult for farmers faced with the stress and pressure of drought to forward plan. They are just trying to get by day to day.

"I don't know how people are making decisions but they have to make decisions and often they are really hard decisions to make about what to sell, what to buy, when to keep going, when to stop, and seeking out options for when they stop," she said.

"They are feeding animals and it's hard work, physically hard, and my heart just goes out to people in trouble who have animals in trouble from these situations.

"You see it in their eyes; they are doing their hardest to do the right thing and whatever they are doing does not come with a good outcome."

On the positive side of the climate

Some farmers have been through droughts before and know that feeling well. They are desperate to avoid it this time around.

"The main reason we did what we did in our business and as a family was to never ever feel that feeling of hopelessness," Yeoval sheep producer Nigel Kerin said.

After the Millennium Drought, Mr Kerin decided to modify his business, to take advantage of unpredictable climates and rainfall patterns.

"What we learnt from the droughts in the 1980s and 2000s is that if you flog the living daylights out of your landscape while you are in a dry period, the grass you grow once you come back into average rainfall is bugger all," he said.

It might be dry now — but there is always hope and having diversity in property means you can work with the weather more. ( Landline: Marty McCarthy )

He lets his pastures rest by reducing most of his livestock. Currently, he only has 20 per cent of his usual herd.

Instead, he "flogs it" when it rains. That doesn't necessarily mean waiting for autumn or winter. It means waiting for rainfall, regardless of what time of year it comes.

"You don't try to make money when it's dry, you set yourself up for when the dry breaks," Mr Kerin said.

Mr Kerin has built this business model around the concept of climate variability which, from a rainfall perspective, refers to how rainfall totals fluctuate above or below the long-term average over time.

Simply put, it means he doesn't expect a certain amount of rain at a certain time of year anymore.

"If it is a drought, it's been going for a while. So I don't think it's a drought. I think it's climate variability. It's influxes of rain then extensive periods without it," he said.

"It seems that with climate variability in this district — and the east coast of Australia — that we get massive dumps of rain that last for one month, then it takes off and leaves us for four or five months at a time.

"If you can build a business model that fits with climate variability and matching stocking rate to carrying capacity, you are setting yourself up to be on the positive side of this climate and not on the negative."

Mr Kerin also breeds a type of faster-maturing sheep, which means he can grow more animals in a shorter time to take advantage of any sudden rainfall whenever he gets it.

"They can reproduce at a younger age and it also allows us to sell the wether lambs quicker than what we used to," he said.

"When it rains it's like bringing in the herds across the Serengeti — when the grass is there we move them on, and when it isn't we move them off," Mr Kerin said. ( Landline: Marty McCarthy )

"The animals put on weight quicker, which if you've matched stocking rate to capacity, means you've got them at a saleable weight a lot quicker before the season turns on you again."

As state and federal governments tinker away on policies to encourage farmers to prepare for drought, Mr Kerin says the push should come from farmers themselves.

"It's not so much about what governments can do. It's about if you want to change, if the need for change inside of you is enough to make you want to build a better future," he said.

"The adaption part. You have to tip out everything you know and re-establish a new paradigm of how to do business."

Grass growth and green days

Grazier Ardie Lord from Sutherland Station in north-west Queensland doesn't like to use the word drought, even though he's technically been in one for five years.

This year he's only had half his annual rainfall — which he refers to as a "light year" — but he looks for the positives in it.

"I might be running a small number of animals but it just feels more comfortable for me to acknowledge I'm just having a light year and to be in balance with that," Mr Lord said. ( Aneeta Bhole )

Mr Lord uses grazing charts to plan 12 months in advance. If he doesn't think he has enough grass to feed his current herd through to the next wet season he begins to destock.

"The upside of a light year is production is higher [than a dry year] and weight gain per kilogram is higher, you've just got to run less animals," he said.

Currently, he's running about 40 per cent of his usual stock, and says that is "very fortunate" compared to many in north-west Queensland. Some have destocked completely.

Critical to his forward planning is making sure he has enough pasture to feed his cattle until the next "green date".

It is the date most likely to bring the next amount of decent rainfall and for Sutherland Station that is about February. It is based on historical records when there is an 80 per cent chance of the wet season starting.

"The first job we have each year is to make sure we're going to see through to the next green date, and adjust our stocking rate to our current capacity accordingly," he said.

The cost of feeding those animals and physical demands of getting food to the animals each day tires many farmers during drought. ( Landline: Aneeta Bhole )

The stress during drought often comes from trying to maintain a large herd size even if they don't have the pasture to feed it.

"If we are having a light year and we're running the appropriate amount of animals it's pretty stress-free," Mr Lord said.

He cautioned farmers against letting their livestock get skinny, to a point they can't be sold.

"It's risky because that's our cashflow and that's our future, so if the animals are losing weight it means we're losing cashflow," he said.

"If we have got the courage to sell them before they get skinny, it's much better to put the money in the bank than hold it.

"As long as they are healthy and can be trucked then there's good value in them."

Carbon farmers capitalise on climate

There's a new category of farming that is helping a lucky few defy the drought in a unique way.

Rather than relying on cattle and sheep for an income, Bourke farmer Michael Marshman makes money from letting trees grow. He's a carbon farmer.

"We know what it's like to go through drought previously, so I feel sad for those in that position of being tight financially," Mr Marshman said. ( Landline: Marty McCarthy )

"Trees are fairly resilient so they continue to grow even when rainfall is deficient, but with livestock we all know once it gets dry the money also dries up," Mr Marshman said.

Carbon farming for Mr Marshman means letting mulga regrow in paddocks where grass once did, and sheep used to graze. He can keep the cattle, because they don't pose a threat to the mulga.

Mulga growing near Bourke in New South Wales as part of carbon farming project ( Landline: Marty McCarthy )

The mulga stores carbon, and the Federal Government buys that storage space off him, through the Clean Energy Regulator, in a bid to reduce Australia's overall greenhouse gas emissions.

"I would hate to think what sort of position we'd be in if we didn't have the regular income stream from the carbon farming," Mr Marshman said.

Sights like this dry dam on a farm in New South Wales make it hard to stay positive — but 'putting wood on the fire' won't help. ( Landline: Marty McCarthy and Ben Deacon )

Geoff Dunstan, a grazier from Cunnamulla in Queensland who also has turned to carbon farming, agrees.

"In a drought you're usually going backwards financially and rapidly working flat out, but at least being in the carbon trade you've got income coming in over that bad period," Mr Dunstan said.

"It is hundreds of thousands of dollars we would not be making in a drought, so it's a real positive in a drought situation."

Not every farmer can go into carbon farming — it only works with certain vegetation types.

Mr Marshman is re-investing the carbon farming money into other agriculture projects to help make his business more drought tolerant.

He has bought a small property north of Bourke on the Darling River where there is a reliable water supply.

Agricultural flexibility is key if you don't know how much or when you are going to get rain. ( Landline: Marty McCarthy )

"We've moved a percentage of our cattle there to feed them, it's a lot easier to manage a smaller acreage when feeding livestock," Mr Marshman said.

He's also bought a third property at Narromine in NSW — it's insurance against drought, but also any potential collapse in the carbon-farming sector.

"We have a property in a higher rainfall area now and when it's dry here we can move livestock there. We have gone for more livestock properties so we aren't just reliant on the carbon farming," he said.

"You never know when the next drought will hit you so be prepared, invest in infrastructure that helps you be a bit more resilient in dry times that are not expected."

You can see the story on Landline on ABC TV at 12:30pm or on iview.