Farmers brace for input price spike

While many farmers have seen on-farm costs double in the past four years, returns have increased by only ten per cent.

The high price of running a farm has been revealed, with producers predicted to outlay $75.9 billion on production costs in 2023-24, according to ABARES.

That amount is the second highest on record, following the $76.05bn spent in 2022-23, $68bn in 2021-22, $58bn in 2020-21 and $54bn in 2019-20, as supply chains broke and input costs increasingly spiralled due to the Covid pandemic, war in Ukraine and inflation.

Rutherglen grains and seed farmer and former Victorian Farmers’ Federation grains council president Ashley Fraser said fuel and fertiliser costs continued to place the most strain on farm finances.

“The cost of production now is a constant battle, particularly with the drop in commodity prices,” he said.

Ashley Fraser of Baker Seeds at Rutherglen. Picture: Yuri Kouzmin

Mr Fraser said while many farmers had seen their own on-farm costs almost double over the past four years, returns had generally only increased by about 10 per cent.

According to a recent ABARES commodity report, farm electricity costs are predicted to surge from $775m in 2022-23 to $928m in 2023-24, a 20 per cent increase.

Repairs and maintenance are expected to rise from $586m to $619m and interest paid on loans from $5.2bn to $6.5bn. Fuel and chemicals costs are expected to clock up $4bn and $4.6bn respectively, having risen from $2.4bn and $2.7bn in 2020-21.

Labour costs are also expected to increase from $7.4 to $7.7bn, with fodder and seed to remain steady at $10.6bn.

Overall, the report forecast a 14 per cent decrease in farm production to $80bn in 2023-24, from the record $92bn result in 2022-23, due to falling commodity prices and drying weather.

Alarmingly, the net value of farm production is expected to fall from $16bn in 2022-23 to $3.7bn in 2023-24, the lowest level since the drought-stricken years of 1997-98 and 1998-99.

Meanwhile, experts predict oil prices to remain sky high in coming months due to increasing demand during the European winter, Saudi Arabia and Russia restricting supply until the end of 2023, and uncertainty around fallout from the Hamas incursions into Israel at the weekend.

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Current VFF grains group president Craig Henderson said the urea market continued to be volatile, with farmers currently paying about $700 per tonne, up from $450 per tonne earlier this year, but down from the $1000 peak price in April 2022.

Farm cash income is predicted to plummet by a staggering 41 per cent in 2023-24.