Written by: Dan Toohey | Planfarm Advisory | Farm Business Advisor | 0455 050 766
When taking stock of the 2022 season, it was a season that brought with it a roller coaster of emotions for many producers and brought with it a need for farmers to be nimble, yet decisive to manage the season that was presented. Although across most of the state, no frost damage of significance was observed, for many farmers the late spring rains brought with it challenges across the entire state, some not commonly faced by the historically lower rainfall areas.
In an area known to be some of Victoria’s most marginal cropping country, for the vast majority of mallee farmer’s, the harvest results were exceptional if the right combination of agronomy, management and a touch of luck was received. Late season hail across a pocket of the Mallee and lower lying country was affected heavily by the high amount of late spring rain and led to crop losses in most cases. Where they didn’t get washed out, lentils were the star of the show in 2022, closely followed by canola and cereals with most producers recording the biggest harvest in their history. Exceptionally strong operating efficiencies below 40% and strong ROE & ROC were observed in these areas, which highlights the mega year 2022 has been for some operators in the north of Victoria and will provide great capacity to cover those ever present ‘below the line’ expenses of finance (lease & Interest), machinery repayments, living costs and of course, build a strong residual profit for their businesses off the back of the 2022 year of effort.
For Wimmera farmer’s, the year was likened to the bag of mixed lollies you get at the local sporting canteen with a large contrast across the area. Most farmers battled all spring, with server disease pressure for most of the season, especially in the Faba Bean and some cereal crops. Double the normal fungicide applications were largely applied across most cropping programs to try and control disease outbreaks which were fueled by the continuous wet conditions, yet in most cases the damage caused was still severe. Although canola stands themselves handled the wet okay, the lodging of vast areas of the crop and inability for many to windrow (swarth) the crop due to impassable paddocks, meant crop losses were observed from both pod fall and just not being able to get the grain up off the ground and into the bin, resulting in a missed opportunity completely outside producer’s control. With this in mind, yields were still respectable for most outside of Faba bean crops, but it was not the year many were predicting it could be at the start of the spring. Operating efficiency suffered because of reduced yields and a heavily fed cropping program and a general feeling across the area was that it was a break even season for most.
Victorian Western districts
2022 harvest washup was a tough one to swallow for many in Victoria’s premier high rainfall cropping area that only saw isolated pockets have an exceptional year, with most experiencing some of the worst results in recent memory. With the promising spring conditions, many elected to supplement the cropping program heavily with late urea applications in the hope of capitalsing on the seasonal forecast. However, the relentless rain led to wheat, barley and beans being largely poor in both quality and tonnage as they just couldn’t handle the wet conditions. The year again showcased the value that raised beds and a history of gypsum applications brings in wet seasons for growers who have invested in this over the years with them faring much better than those who haven’t. This does pose the question, is the risk now too great given the investment into a cropping program not to be investing in these things to deal with the high rainfall seasons? The sentiment for many is to accept the results of the 2022 season, take any learnings they can from that season, and now refocus on executing the cropping program as the 2023 year gets underway.
Looking ahead into 2023
The elephant in the room heading into 2023 is the looming difference the changed interest rate market is having on business’s bottom lines, as variable rates have effectively doubled and then some in the past 12 months. Most producers in Victoria who have expanded in recent years are carrying significant debt largely because of land acquisitions, with most who are on variable rates now paying between 5.25% – 6.50% on term lending and 5.5% – 7.5% on new equipment finance contracts. It’s more important than ever that producers understand the position of their business, to fully understand their strengths, weakness’s and borrowing
power before walking into the next bank review and to know as well if the rates they are paying are aligned to both the market and warrant the risk they may pose to their bank.
Critically questioning the aggressiveness of land purchasing in this market and at the current land prices which comes with a significant ownership cost, again needs to be fully understood before proceeding. This can only be done if you know how the existing business is truly tracking! Producers also should be looking critically into if and where they can enhance their income, whilst at the same time controlling the operational expenses needed to grow that same income stream in the business. With the Autumn break already here and seeding ramping up across the state, it’s setting farmer’s up well if they can get the crops in during
the sowing window to have them established before winter arrives in the months ahead. We here at Planfarm Advisory are excited to work closely with our clients to work through the challenges that face all farmers in the coming seasons and to make sure they are well prepared to act decisively, potentially allowing them to capitalise on opportunities that will inevitably come their way.