Rising production costs and impacts of war a concern for producers

“But on the other it’s becoming harder and harder for small producers like myself to be able to pay those bills.” With rising costs across the industry, the South Australian Wine Industry Association conducted a survey to create a guide for employers to see how wages and salary had changes throughout the industry in the last year. SAWIA business service manager Henrik Wallgren said that while the lack of workers was causing upward pressure on wages, there were more structural factors at play. “Whilst a tighter labour market is putting upwards pressure on wages, the issue about staffing shortages is broader than wages, many of them being long-term,” he said. “An ageing population, challenges recruiting for work in regional locations, lack of affordable housing in regional locations, COVID-related international and state border closures further limiting the supply of labour. “It is an employee’s market, with a large number of job openings across industries and employees at times applying for more than one job at a time. “Employers tried to work around this in a number of ways, including commencing recruitment earlier than otherwise, getting in touch with vintage workers from previous years and focusing on retaining workers, including owner/ operators and existing staff working longer hours. “Anecdotal evidence suggests that this at times have caused challenges and unexpected vacancies nearing vintage. It was also reported that at times not all positions could be filled.” Competition between producers to get pickers also meant somewhat of a bidding war started between producers to get boots on the ground. Wright mentioned that there was tension in McLaren Vale when trying to get pickers. “Everyone was scrambling for handpickers. We had to get the whole cellar door team out to pick a couple of times,” she said. “Be thankful for backpackers and fingers crossed that they come back soon.”

The ‘rise and rise’ of input costs and fallout from the war in Ukraine are weighing on sentiment in Australia’s agricultural sector, with producer confidence declining in the latest quarter. Results of the quarter two Rabobank Rural Confidence Survey reveal optimism about high agricultural commodity prices has been reined in by the increasing cost of vital farm inputs such as fertiliser, fuel, freight and machinery and broader inflationary pressures in the Australian economy. In addition, the latest survey reveals 50 per cent of Australian producers believe the ongoing conflict between Russia and Ukraine will have a negative impact on farm businesses, while 25% expect the effect could be positive. While income projections for the 12 months ahead remain stable, the number of producers looking to increase investment has declined slightly this quarter. The latest survey, completed in May, found 28% of Australia’s primary producers now expect business conditions to improve in the coming 12 months (down slightly from 31% with that view in the previous quarter), while 16% are anticipating a deterioration (from 14% previously). More than half (53%) of respondents expect business conditions to remain stable in the year ahead. This marks three consecutive quarterly declines in net rural confidence and brings farmer sentiment back to levels last seen in June 2020, after the first pandemic lockdown. Rabobank Australia CEO Peter Knoblanche said producers had been enjoying high agricultural commodity prices and generally-excellent seasonal conditions in many parts of the country for more than two years, but many in the sector were now facing considerable margin pressure with input costs rising on all fronts. “The benefits of those investments are certainly helping farmers create some efficiencies, but the cost pressure is not easing and producers definitely need those higher commodity prices in order to meet rising input costs,” he said. The latest survey found the expectation of rising commodity prices remains the main driver of optimism among respondents with a positive outlook, while 62% of those expecting conditions to deteriorate cited rising input costs as a key cause for concern, ahead of falling commodity prices (27%), overseas markets (15%) and labour shortages (9%). Knoblanche said the Russia-Ukraine war was also hanging over the sector, with its impacts on key inputs of fuel and fertiliser sending prices for both skyrocketing, cutting farmer margins in a range of sectors. “It is undoubtedly exacerbating many of the cost and supply issues which were already in play last year,” he said. “But for some sectors, especially grains, we are seeing the conflict impact global supply and push prices higher, and also deliver higher local prices with strong demand for Australian grain as the world turns to our producers to help meet critical food needs.

“But as the next round of EU sanctions come into force, there is a lot of caution among farmers about what this will mean for the longer term, which is flowing through to lower levels of optimism.” This quarter, producers were specifically asked their views about the impacts of the war in Ukraine on agribusiness. Of the 50% believing it would have a negative or very negative effect on their farm business, the main concerns were in relation to higher fuel prices (cited by 49%) and increased costs for inputs including fertiliser and freight (cited by 61%).