An ongoing tight labour market is unlikely to provide any cost relief to farmers into 2023.
THE labour issues that were in the news throughout 2022 haven’t gone away as we move into February 2023.
That’s particularly the case in terms of workforce issues across the agricultural supply chain and the barriers to securing reliable, consistent on-farm labour.
Agrista data for average on-farm proportional costs for beef, prime lamb and wool-producing farms across Australia shows that labour costs and fees spent on contract services – such as shearing and crutching for sheep-based enterprises – feature as significant cost items in the farm budget.
For a beef enterprise, wages and contract service costs average around 26 per cent of total farm costs, according to the Agrista data set.
The wages bill for a beef farm, including any wages paid to the farm owner, accounts for around 21 per cent of the total on-farm spend. Meanwhile, contracting services cost around 5 per cent, on average.
For a prime lamb or wool operation, the addition of shearing and crutching costs lifts the total labour spend to about 35 per cent of total on-farm costs.
An average prime lamb enterprise spends about 17 per cent on wages, 12 per cent on shearing/crutching costs and 6 per cent on other contract services.
An average wool-producing farm spends about 20 per cent on wages, 13 per cent on shearing/ crutching costs and 2 per cent on other contract services.
The Regional Institute Australia provides a monthly summary of the number of jobs being advertised across regional Australia. This is a useful resource for providing an overview of the broader labour force within the regions.
However, the data can also be filtered to provide a snapshot of agricultural job vacancies and how much demand there is for agricultural workers.
During the past year, open vacancies for agricultural jobs in regional areas rose to the highest level since the mining boom in 2009.
This is likely a sign that those in agriculture are having to advertise further or pay more than the farmer down the road to get roles filled.
Indeed, the average monthly job vacancies for 2022 was 1,327.
In the decade beginning in 2010, the average monthly number of agricultural jobs being posted online sat at 732, so current advertisements are running about 80 per cent higher than what would be considered normal.
An ongoing tight labour market is unlikely to provide any cost relief to farmers into 2023.
Backpacker volumes are beginning to return, but the current flow of arrivals shows that numbers are still 20-30 per cent below the pre-COVID levels, and with UK backpackers no longer required to undertake a regional stint to extend their visa, there’s likely to be pockets of low backpacker labour supply throughout the 2023 season.
But it’s not all bad news on the farm-cost horizon. Global energy prices are in retreat, and this means that, on an overseas basis at least, fertiliser prices are also declining.
As the Agrista data highlights, across all livestock enterprise types (beef, prime lamb and wool combined) fertiliser is the fourth highest spend, at around 9 per cent of total on-farm costs, on average.
For a beef enterprise the fertiliser spend sits in second place in terms of the costliest spend behind wages and equates to nearly 12 per cent of total costs.
Prime lamb operations spend about 10 per cent of their total costs on fertiliser, which is the third-placed costliest spend behind wages and shearing/crutching costs.
Meanwhile, for a wool-producing operation, fertiliser costs account for just 4 per cent of total costs and drops to seventh place in terms of the costliest spend.
The price of urea in the Middle East has come under considerable pressure since the start of 2023, dropping to $645 per tonne on average for the month.
This is great news for Australian producers, as this time last year it was priced at $1,090/t.
The big question now is whether the current fall in the global fertiliser price will be passed on to local producers and how long the price adjustment will take, as historically price declines for fertiliser have been rather slow to show up in local prices.
- Matt Dalgleish is co-founder and director of Episode 3 (EP3)
