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Combat Rising Fuel & Farm Input Costs in 2022

This article was written by Australian Agri Finance.

There is considerable anxiety amongst the agricultural community as input costs continue to
rise going into 2022. Record high prices for fuel, fertiliser, and equipment combined with
continued labour shortages pose new challenges for Australian farmers. With some
mitigating strategies in mind, however, agricultural businesses can combat these rising
production costs – and future-proof their operation.

What’s Causing Input Costs to Rise?

Every person in Australia is currently feeling the effects of rising fuel costs. These price
surges have come as a result of recent export restrictions announced by Russia and China.
As a country, we are seeing record high fuel prices, with the cost per litre consistently sitting
over two dollars. While we all are feeling this price hike, the agricultural industry is taking the
hit hard.

With most of Australia’s fertiliser supply imported, supply limitations and logistics challenges are causing steep price hikes. Production outside of China and Russia has been further impacted by energy price increases, escalating the global supply issue.

What Does This Mean for Farmers?

Almost all agricultural tasks involve the use of fuel. And unfortunately, the rise of fuel prices
concurrently impacts the cost of products and goods. But it is not only fuel prices that are
soaring. Fertilisers, pesticides, and equipment costs have spiked too.

Seeing these numbers continue to rise, it’s understandable that Australian farmers are
feeling concerned. The higher production costs facing farmers in the year ahead will see
many changes in store for the agriculture industry.

First and foremost, it is possible farmers will see a short term fall in crop yields moving into
2022. As fertiliser prices continue to rise, many farmers will need to reduce their fertiliser
application, which will result in a lower output of crops.

Consequently, we may see rises in food prices and general cost of living. This comes as a
repercussion of rising input and production costs for farmers.

With labour shortages widespread and a subsequent increase in labour costs,
labour-intensive operations will take a further financial hit in medium-term predictions.

How Agricultural Businesses Can Adapt

While the rise of fuel and farming input costs is not ideal, it’s not all doom and gloom for
Australian farmers. There are plenty of changes agricultural businesses can make to combat
these new challenges.

Variable Application Technology

Firstly, reducing fertiliser application as much as possible also keeps input costs to a
minimum. Understandably, less fertiliser will decrease crop yield – so to maximise the
efficiency of your fertiliser, consider employing variable application technology. This
technology allows you to systematically apply your fertiliser at different rates. Not only does
this increase efficiency through automation, but this technology significantly reduces fertiliser consumption, saving precious dollars.

Find Fertiliser Alternatives

Alternative growing methods show promise in reducing input costs. There is plenty of
ongoing research aiming to find the best fertiliser replacements for farmers. Manure is one
great alternate soil improvement option farmers can utilise. It has proven to produce great
soil health and crop nutrition.

Legumes are also another soil improvement strategy named to revolutionise broad-scale
farming practices. A new variety of pink serradella, called Fran2o, has shown very promising
results for crop-pasture rotation. Research across four Australian states shows Fran2o
produces almost all the nitrogen required for subsequent cereal crops.

Increase Fuel Efficiency

It is time for farmers to get savvier than ever about their fuel usage. The magnifying glass
will be placed over operations and transportation on the farm in 2022. Limiting the number of
times crops are sprayed and careful route planning to decrease unnecessary overlapping
will be primary concerns.

Factors to consider include fuel storage, choice of gears, travel speed, travel patterns, oil
and equipment fuel efficiency. Technology also plays a role here, with up-to-date precision
agriculture and guidance systems providing opportunities to maximise fuel efficiency.

How Finance Solutions Help Businesses Adapt

When the market environment changes, financiers and finance brokers have a key role to
play. Adapting and future-proofing a farming operation typically requires strategic investment in new equipment or methodologies.

Equipment finance and alternative solutions, such as equipment rental, enables farmers to
acquire and implement productivity-enhancing technology. With such a steep hike in input
costs, the time is right to make those cost-saving equipment purchases.

If the rising cost of production sets agricultural businesses too far behind, short-term finance
solutions can keep a farm afloat during challenging times. Options like sale & leaseback
arrangements mean businesses can unlock the equity in their existing assets for a cash flow
boost.

We can provide the financial solutions to help farming businesses adapt and thrive in 2022. Our finance brokers can help see your business through this rough patch and keep your farm finances ticking over in challenging conditions.

To discuss your finance options, chat with the experts at Australian Agri Finance on 0457 853 226 or email at info@austagfin.com.au.