Production

High production costs key grower concern: White Paper

Beef Central, 06/06/2014
Federal agriculture minister Barnaby Joyce.

Federal agriculture minister Barnaby Joyce.

High costs of production and unprofitable prices remain the issues of greatest concern to producers according to feedback provided to two ongoing Government reviews of the rural sector.

Numerous producer submissions to the Senate Inquiry into grassfed beef industry levies and structures have branded low farm gate returns that fall short of covering production costs as the biggest threat to the Australian beef industry’s future.

At the same time the Federal Government’s White Paper for Agricultural Competitiveness has also been asking primary producers across Australia to outline the issues that most keep them awake at night, and to offer any possible solutions they believe the Government should consider in response.

After months of holding forums around Australia and taking online submissions, Federal Agriculture minister Barnaby Joyce yesterday said that producers have highlighted high-input costs as the biggest issue of concern.

The fact that high input costs had come through so strongly in the first round of submissions did not come as a surprise, Mr Joyce said, but it was still of “significant concern”.

Mr Joyce said Australian farmers received the second lowest agricultural subsidies in the OECD and also had higher input costs for production than many international competitors.

He said the submissions read so far showed that high costs of production were hurting large and small producers alike.

Sugarcane growers Maryanne and Michael Muscat’s submission outlined the significant challenges facing their farm business:

Input costs continue to rise every year but we cannot raise our selling price because we are ‘price takers’. Electricity, fuel, rates, steel, fertiliser, services, living costs, etc, are on the rise all the time…

Another submission from Georges Island Agriculture, based near Spring Ridge, New South Wales – in the Minister’s own electorate of New England – listed a number of farm costs and examples of red tape administered by multiple jurisdictions that affected their profitability:

Rates, levies, duties and service costs have increased by percentages far in excess of farm incomes. Government legislation and compliance costs for such things as OH&S, chemical certification, licenses etc creates too much paper work and use of time that is non-productive.

“This White Paper process is all about better understanding issues like this so we can create a more agile and competitive agriculture sector,” Mr Joyce said.

Submissions from peak industry bodies to landholders as well as producers of all sizes cited a variety of input cost pressures ranging from labour market to energy costs, infrastructure and freight, regulatory burdens and third party certification frameworks.

“Clearly the submissions indicate to me that understanding the factors that influence Australia’s agricultural input costs and finding ways to address these factors will be critical if we are to remain competitive internationally.

“Rising input costs will be a key issue addressed in the Green Paper, which is the next stage in the development of the White Paper.”

Input costs for Australian beef producers have doubled in the past 25 years

MLA released a new Beef Producer Input Price Index last month which showed that input costs for Australian beef producers have doubled in the past 25 years.

The BPIPI was constructed using the prices of 15 major input costs faced by beef producers, with the prices weighted accordingly and aggregated to form a northern and southern index.

Between September 1988 and December 2013, northern Australia input prices have increased 93 percent, at an annual average rate of 2.61pc.

This was slightly less than southern Australia, where input prices increased 105pc, at an annual average rate of 2.86pc.

MLA said that in both instances, the increase was less than the Consumer Price Index (CPI) over the same period, which increased 109pc over the period, at an annual rate of 2.93pc.

The main finding of the research underscored the feedback producers are giving to both Government reviews – that input costs have increased significantly over the past two decades, while output prices have increased at a significantly lower rate over the same period.

Labour costs set to rise

On Monday the Fair Work Commission announced an increase in minimum wages of three percent, which will affect all modern awards.

The National Farmers Federation says it is concerned that every rise in labour costs makes it harder for farmers already struggling to keep farm-business costs down and maintain competitiveness.

In its submission, the NFF asked the Commission to take into account the specific concerns affecting agriculture, including the current severe drought, when considering a national wage rise.

The rise comes on top of a recent increase in the superannuation guarantee—the employer contribution component of worker’s superannuation entitlements—to 9.5 per cent.

While the increase in wages announced on Monday is above the consumer price index and the wage price index, the costs to farmers will be partially relieved by the Budget decision to defer further increases in the superannuation guarantee until 2018.

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Comments

  1. Dale Knuth, 06/06/2014

    Phillip is right – MLA is too close to both processors and feed lotters – it is in their best interests to keep farm gate prices from rising. Cattle producers sell cattle on the hoof and yet we are paying to promote meat sold by processors ! I don’t ever recall seeing advertisements for sugar paid for by cane growers. Have you? From what I read overseas prices for our meat are good. Compare the price paid for live cattle with meat prices in Australian, yet we are expected to bear the brunt of promoting the processed product both here and overseas.

  2. Rob Moore, 06/06/2014

    Spot on Philip- I don’t see anyway to force input costs down BUT I see a very clear path to get “farmgate ” returns UP. The introduction of a simple trade practise rule to create COMPETITION for the 80% of commerce that goes unreported now – will give transparency to the market . The Plank from the Americans -Packers and Stockyard Act (PSA circa 1921) which demands EQUAL ACCESSS for anyone to supply a given contract specifications on a first in basis will see all the captured supply lines that exist now -outlawed onto the open market! Proof positive of this result is the record livestock prices in the USA of $4-5 per kg LIVEWEIGHT .
    My submission is well and truly in Barnaby’s “White Paper” but it must be a bit too hot to handle. I am seeking MLA Funding to get the Business Case and Modelling done to facilitate this new Bill that is required. This will ease the pain and give the politicians some courage! Be nice to have some Producer support as well but will push ahead regardless as I am certain that this is the only way forward for ALL Primary Industry in this Country.

  3. Philip Downie, 06/06/2014

    I hope the MLA comment on CPI had more to it, otherwise close them down. Nothing is going to happen on input costs that will cost the Govt what we need is something done about farm gate prices which have moved next to nowhere over the last 25 years MLA. MLA too close to processors.

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