Cost/price crossroads

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By Dwain Duxson - An Ag Enthusiast

Cost/price crossroads - The cost/price crossroads is a place we don’t want to go. It’s where our costs eat back our margin to a point where even the best season or best prices struggle to eke out a positive result.

I heard it mentioned the other day that costs have caught up with the price of Land, but production hasn’t. Has the rise in fixed costs, e.g., rates, insurance, interest, electricity and the like, put a scare through the industry? And does that mean that Farming in Australia is at the cost/price crossroads? Our business models in Farming have always been able to cope with these costs, but now it’s starting to falter.

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We wrote last night about how the wine industry at the grower and brand level is struggling, not because people are drinking less wine but because the shift in the margin to other parts of the supply chain (retailers, restaurants, etc) has left the grower margins decimated. See the story here. We now have Croppers questioning the price of new Machinery, and some are starting to downscale the size of the Machines they use. This cost/price crossroads will fast-track change in Agriculture.

We mentioned the wine industry, but in the Wool industry the cost of Shearing a Sheep over, say, 25 microns is now a negative margin process, one that in the past was at least profitable. This automatically changes the face of the Wool industry and Sheep breeding in general. With all this, there are opportunities as well. Do you see parts of your business or industry that are at the cost/price crossroads? Reply to dwaind@thefarmersclub.com.au

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