Instability in global markets is shaping up to be favorable for Australian Farmers, and it is predicted that this year will produce another record crop (Department of Agriculture, Water and the Environment, 2022).  While farmers are seeing some of the highest commodity prices in years, input prices are following the same trend. During budget review meetings with ORM clients, input price increases have dominated conversations, with prices for fertiliser, chemicals, and fuel having increased up to three-fold on last year. Russia was the world’s largest exporter of fertiliser and Ukraine supplies potash and urea. Russian exports have all but ceased due to the sanctions placed upon them and Ukraine is unable to export its key fertiliser ingredients due to the conflict.

Managing and planning for increased input prices is more important than ever. Farmers are turning to different methods of application and crop rotations to help mitigate against these high input prices.

Modified crop rotations

When preparing 2022 plans with ORM clients, there has been a trend towards an increased area of legumes. Farmers and agronomists are adding in these nitrogen fixing crops to reduce the amount of nitrogen they are required to buy for this year and next. A study conducted by Chris Minehan (RMS Agricultural Consultants) concluded that including lentils in your crop rotation can increase financial returns by around 50%. This is not only due to the reduced fertiliser costs, but also the subsequent higher cereal crop yields due to the stored N in the soil being higher than a 100% cereal crop rotation.

During meetings with ORM clients, we have found the businesses with the best budget surplus are the ones that are adapting their farming system to reflect the changes to the global markets. Whether taking advantage of high commodity prices or increasing the area to lower input land use options such as grain legumes and livestock, it is important that farmers are weighing up the risks associated with the current high cost of inputs.

 

Precision Agriculture

Costs can be further managed using precision agriculture to reduce and redirect inputs for best production and return. Agronomist David Eksteen (The Weekly Times, 2022) suggested that soil testing and working out what nutrients your soil already holds is one way of reducing costs. Eksteen stated (The Weekly Times, 2022) that farmers might be able to reduce the amount of phosphorus applied as phosphorus builds up in the soil. By conducting soil testing it also allows growers to know precisely what amount of fertiliser they need to optimize results and reduce costs. Adrian Roles (AgTrak) spoke about his first-hand experience with precision ag at the GRDC March 2022 Farm Business Update in Bendigo. Roles suggested one way for growers to reduce their fertiliser costs is to be more efficient and effective with fertiliser application.

Designing a variable rate program takes time and investment and is not only financially beneficial but also agronomically too. Roles confirmed that it takes time and growers have to be patient while designing a program. Roles gave anecdotal evidence of how their farm has reduced costs using this precision technology. The increase in input prices has increased the relevance of precision agriculture for the future of profitable cropping operations.

 

Take home message

Commodity prices are at record high levels, and there’s confidence for a good production season in 2022, however input costs have increased up to three-fold and can erode profits. To reduce financial risk in 2022 some businesses have modified crop rotations and are using precision agriculture to manage these high input prices. Increased risk can come from change, so it is critical that farmers reflect on how they are managing their farming system through these volatile times.

 

Gemma Petsinis, Graduate Agribusiness Analyst

 

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