Fertiliser prices, fuel, labour costs at record highs as sowing approaches

Farmers are banking on high grain prices to offset skyrocketing fuel, fertiliser, chemical and labour costs this season.

Growers are facing input costs more than double what they were last season for some commodities, but high grain prices and careful planning may offset the worst of the damage, experts say.

Thomas Elder Markets analyst Andrew Whitelaw says four major agricultural inputs are all in low supply and suffering from large price increases.

“We’re talking about fuel at record (price) levels, fertiliser at record (price) levels and chemicals at close to record (price) levels. And then you’ve got you’ve got labour as well (in low supply),” he said.

Mr Whitelaw said farmers might be able to avoid losing out in the highly volatile market if they were strategic.

“We need to be keeping a very close eye and buying strategically where we can,” he said.

While many farmers had already bought their starting fertiliser and glyphosate, other inputs such as urea were “not so heavily bought”, and high fuel prices were likely to put a dent in some budget bottom lines, he said.

Current indications were that grain prices would remain relatively high, and could offset high input costs, but there was no guarantee, he said.

“The fundamentals are there for fairly good pricing … (but) just because the prices are good now doesn’t mean they’ll be good by harvest. And that is the biggest concern.”

Russia’s invasion of Ukraine had elevated global grain prices, but if there was a ceasefire, prices were likely to drop again, he said.

Farmer Ben Wundersitz with his team on his Eyre Peninsula property. Picture: Supplied

Farmer Ben Wundersitz, co-owner of 6500ha cropping operation Anna Binna in South Australia, said he was doing everything he could to try to insulate against price shocks.

Mr Wundersitz said he had locked in purchases of vital inputs for the 2022-23 cropping season six months ahead to secure supply, and had tried to time his purchases strategically.

“We try and target the cycle of when (prices are) low and buy in bulk,” he said.

The company purchased its urea supplies for the coming season in September last year, locking in prices between $900 and $950 a tonne, about double what it paid in 2020.

At the same time the company purchased MAP and DAP fertiliser products at about $950 a tonne, a significant increase on the $650 paid in 2020.

Anna Binna also invested in on-site fuel storage, and stocked up on months’ worth of supplies to avoid the worst of current high fuel prices.

“We’ll try and ride the fuel out for three or four months and use the stock on hand,” Mr Wundersitz said.

The company was concerned if it didn’t order its inputs well in advance, it could lose out altogether, he said.

“In this world now with Covid and shipping (delays), I just don’t think you can trust in typical supply times, and in the product actually being here,” he said.

“I don’t think we’re doomsday preppers, I think we’ve just taken the attitude that if it’s been in our control, we might as well fix it.”

Despite the high input costs, Mr Wundersitz said he expected the company’s budget to balance due to higher grain prices and careful planning.

The company planned to forward sell 40 to 50 per cent of its wheat, a number that could rise to between 60 and 70 per cent prior to harvest, he said.

“Assuming we can forward sell some grain into these markets, and potentially this market holds, I think our biggest risk is getting rain,” he said.