Aus: Rising costs put more pressure on crop farmers

The grains industry is warning high oil prices will result in a smaller harvest this year, as farmers look to reduce the costs of diesel, freight and fertiliser.

In fact, the Grains Council’s David Ginns says a combination of rising oil prices and the high Australian dollar could move farmers out of cropping altogether.

He says many farmers will find strong beef and lamb prices too hard to resist if oil prices do not come down.

“The unfortunate thing is we’re probably getting close to a point where we might be killing the goose that laid the golden egg,” he said.

“A lot of producers may be looking at the costs of cropping and their schedules compared to other enterprises and they may drop out of grain and go back into livestock.”

But one market analyst is not convinced it is a good idea to move away from crops in favour of livestock.

Malcolm Bartholomaeus from Callum Downs Commodity News, believes returns for grain will still be better, even with the current price outlook.

“I’m not quite sure of the logic of that because to buy stock, to stock a hectare of land that you are taking out of cropping, or to hold back stock and not sell them so that you can run them on a hectare that you might crop, will probably cost you a lot more per hectare than financing a crop, so that’s the first point, it can be pretty severe on the immediate cash flow,” he said.

“The second point would be that we are already seeing year on year decline in lamb prices.”

And in more bad news for Australian grain growers, Europe has moved to increase its level of subsidies on wheat exports.

The EU has signalled it will increase payments to exporters from four to up to 12 euros in an attempt to clear its harvest.

The Grains Council says that could reduce world wheat prices by nearly $20 a tonne.

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This is a transcript from the ABC National Rural News that is broadcast daily to all states on ABC Regional Radio’s Country Hour and in the city on ABC News Radio.

ABC News