Market Morsel: It officially costs more than ever to be a farmer.
Market Morsel
In the press this week, there have been a lot of articles about how Australian agriculture has hit A$88.4bn. This is the highest level since the record A$94.4bn in 2022/23. This is great and shows the value that the industry is returning, but are we forgetting something when we only concentrate on the wins?
Whilst what we make in agriculture is extremely important, what it costs to make our produce is of equal value. The cost of producing has hit record highs this year. In the first chart below, we can see the agricultural value and the agricultural costs over time.
They tend to follow a very similar trend, and this year was the record in terms of agriculture costs. The second chart shows the annual change (%) of costs and value. They tend to follow one another hand in hand. ?
In the third chart, we can see the ‘margin’ of agriculture: the value minus the costs for the whole industry. We have seen increasing levels in recent years, and that is clearly a good thing. However, we have also seen very good weather in many places, which has caused high crop yields. If the weather turns for the worst for the nation as a whole, then we could see margins being squeezed if costs don’t decline.
It is important to note that next year, the value is likely to decline as grain prices fall, and the impact of the poor weather in Victoria and South Australia in 2024 is considered.
The main thing, though, is that we, as an industry, have to concentrate equally on the cost of agriculture and the value it brings. Costs are record high, and they can’t be ignored.
