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Failing to plan, is planning to fail – agricultural inputs for 2022

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Agribusiness Australia, e-news, 15 November 2021, featuring an editorial by Mark Allison

Like many businesses, agribusiness is the same in many ways. There is risk and uncertainty, there is profit and loss and there are inputs and outputs. Like purpose and pride, profit is also a motivating factor of farming.

The most straightforward formula for on-farm accounting of profit is income multiplied by yield, minus costs.

Income: The income component is the price received for the output of the farm. In cropping businesses, this is the income from sales of grain/oilseeds; in the livestock industry, it may be the sale of cattle.

Yield: The yield is the volume of grain/oilseed produced for the given area; in a cattle farm, it may be the weight of meat added.

Costs: The total costs of producing the crop are deducted from income. These costs comprise costs that are fixed farm costs such as depreciation and management and variable costs that relate directly to producing a product, such as chemicals, fertilizer and machinery running costs.

It is important for agribusinesses to examine both sides of the ledger, from input to output.

There is a tendency within the agricultural markets space to focus on the income side of the profit equation. The price of beef received at the sale yard, or the price of grain delivered to port. Discussions of input pricing rarely occur in the agricultural press.

Many base premises have changed over the two years of COVID, and as we come out of this period, a number of side effects are evident in the transition. One of these side effects is the impact on global supply chains, manufacturing and logistics.

Agricultural inputs are under a great deal of pressure and are in the process of causing a cost-price squeeze at a farmer level. The cost of nearly every input has risen dramatically during the past 1-2 years.

Agribusiness Australia logo

The implications and impacts of these changes on a number of the main agricultural inputs including fuel, timber, freight, chemicals and fertilizer are considered below.

Mark Allison is the CEO and MD of Elders Limited, and the Chair of Agribusiness Australia.
Learn more about Agribusiness Australia here.

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