Farmers warned to expect ag-machinery price jolt

The cost of farm equipment is about to soar, driven up by escalating freight costs and port prices. This is how much you could save — before a perfect storm of factors hits.

Freight costs have doubled for some trade routes to Australia in the past 18 months. Rising shipping rates are one of several factors that are likely to drive up the price of agricultural machinery in Australia. Picture: William West/AFP

Container shortages, extreme-cleaning regimes, expensive steel and stink bugs are just four of the ever-expanding list of reasons that ag machinery prices in Australia are likely to rise by as much as 10 per cent in the coming year.

Tractor and Machinery Association chairman Doug Robinson said the cost of freight from some overseas ports had more than doubled in the past 12 months, while steel prices had gone up by 20 per cent and componentry shortages had pushed up the prices of parts.

He warned that manufacturers and distributors had passed on some of the costs to consumers, but steeper hikes were inevitable.

“I don’t think we’ve seen the worst of it,” said Mr Robinson, who is also ag division general manager of machinery distributor PFG Australia.

He estimated PFG had experienced an increase of 3 per cent on the cost of machines and 2 per cent on the overall cost of freight in the past year.

“We, on average, only passed on 3 per cent at the moment,” he said, speaking about PFG. “I don’t think we’ll see the full justification of steel increases, consumable increases and freight increases until the end of the year.

“I anticipate manufacturers will increase significantly the cost to us, and we will have to pass that on. We could see as much as another 6 to 10 per cent.”

FREIGHT COSTS

With brands including German-manufactured Deutz Fahr, South Korean-made Kioti, and Maschio Gaspardo implements manufactured in Italy, Romania, India and China; PFG Australia’s supply chain included many locations where ports and factories were severely disrupted last year.

Deutz-Fahr tractors are manufactured in Germany, and importer PFG faces potential cost increases due to the steady rise of the price of shipping.

Maschio Gaspardo equipment is manufactured in northern Italy, where port operations came to a standstill for several weeks last year during extreme Covid outbreaks.

“The cost of a container out of India has doubled in the last six months,” Mr Robinson said. “That is if you can get one.”

International freight forwarders Stokes and Bell confirmed costs had increased dramatically, with rates doubling from southern China’s main ports to Australia since January last year.

Managing director Lluna Kylin said reduced operational capacity at ports, a global redistribution of containers caused by unexpected changes to trade and health protocols such as deep cleaning between shifts at wharves contributed to the skyrocketing costs.

“If there are still disruptions in significant trading countries (in the future), it will continue to have a disruptive effect,” he said.

MORE PORT DISRUPTION

Routes from southern China had been disrupted as recently as last week, when ports there were working at reduced capacity due to new Covid outbreaks.

“Many ports are either having to be skipped by shipping lines, or containers re-routed to load at nearby ports,” he said. “The vessel either stays twice as long to be loaded twice as slowly, or they take only half the containers.”

CONTAINER SHORTAGES

A pileup of empty containers in Australia over the past 12 months also pushed up freight prices, Mr Kylin said.

“That peaked near the end of last year, and was being a particular problem,” he said. “The container parks really were full. They couldn’t take any more empty containers; transport companies were needing to hold them – there is another cost.”

QUARANTINE DELAYS

And finally, the already costly quarantine requirement to keep brown marmorated stink bug out of Australia became even more complicated because of Covid.

Machinery imports from 37 countries, including the US, much of Europe and Canada, are subject to stringent stink-bug prevention protocols, including offshore fumigation of ships from September to April.

“Quarantine officers have had to go out to inspect the vessels offshore,” Mr Kylin said. “That became more difficult due to Covid. Before that, you could send Australian citizens (the quarantine officers) out to the vessels lying off shore. Then suddenly you couldn’t because you didn’t know the Covid status of shipping crews.”

Mr Robinson said the industry accepted the need for fumigation and quarantine checks to safeguard Australia’s growers, but that the “timeliness” through the ports had “not been the best”.

“We are ending up with not only the costs of fumigation, but the length of time means we have paid demerits on containers,” he said.

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