Written by: Bronson Gledhill | Farm Business Consultant | 0497 822 681
Times are a changing and broadacre producers throughout the state are becoming accustomed to an unattractive outlook driven by our beloved operating costs (not). But the issue succeeds that of just our broadacre buddies as our vegetable growing companions are also feeling the pinch.
Many of the pressures felt by broadacre farming operations in the last year have been exponentially felt throughout the vegetable growing areas of the state – particularly given the labour-intensive nature of the industry. Whilst borders have opened, and government incentives have been put in place to stimulate international labour availability (ie. backpackers), the demand for their services has placed a strain on the profitability of their enterprise.
These travelling workers are faced with two options:
- Spend all day in an airconditioned header or chaser.
- Spend all day out picking/cutting vegetables in thesummer heat.
I’ll leave it up to you to decide which option the majority opt for. The numbers do not lie and the pressure on profitability is evident and can be recognised by the increase in costs below.
The above point is by no means under-playing the difficulties that many have had in finding workers for key busy periods throughout the past two to three years in the Wheatbelt. However, given that the employee requirement is effectively 10:1 (ten vegetable employees required for every one broadacre) you can start to see why many business – particularly those that cannot offer top machinery or accommodation – are having to pay nearly $30,000/ha. Way more than pre-COVID.
There has been a similar storyline for other inputs with the rising costs of chemicals, fertiliser, insurance and diesel. Just like that of broadacre operations, this means that large scale cost-cutting is not a viable option for maximizing profitability.
So, what are the top producers managing to do?
Our recent work in the Building Horticulture Business Capacity Project has led us to work closely with a range of vegetable growers throughout the WA growing region. Through this work we have discovered three clear characteristics of businesses succeeding through adversity.
Market Access & Relationships
Assessing markets and determining which best suits your product, location, and timing of sales. Producers who have good relationships with their customers or buyers often have greater scope for negotiating pricing, which is vital in the current environment of rising costs.
Focus on a Limited Range of Products
Less is often more. Results showed that keeping the business simple and consistent correlates with higher profitability.
Persistent inclination to look more deeply into their business, rather than being in the business, and challenge everything. Businesses that possess these three characteristics are consistently placed in the Top 25% of producers year-on-year. Whilst some of these characteristics may differ from those of your broadacre enterprises, there is no denying that its important to acknowledge the struggles that costs are placing on the efficiency of all agricultural businesses throughout the state.
And it may explain why your grocery bill is a little more than it has been in the past…!