Market Check - Soaring Costs of Production in 2022

Soaring Costs of Production in 2022

Northern NSW based agronomist and farmer, Bradley Coleman, discusses the huge increase in input costs and its effect on costs of production this season. Brad is a private agronomist with Coleman Ag based at Rowena, servicing farming clients on the NW Plains of NSW.  His clients grow a range of winter cereals, legumes and oilseeds, plus sorghum and cotton.

Growers west of the Newell in NSW (like all within Australia) are noticing a dramatic increase in the cost of producing the 2022 winter crop.  A combination of factors has combined to result in approximately a two to three-fold increase in expenditure this season. Moisture conservation is key, therefore fallow weed control is vitally important in this summer rainfall dominant environment.  2021/22 was a wetter than average fallow period with several rainfall events.  Hence there were more fallow sprays required with higher application rates than typically applied.  Plus, an extra double-knock (typically Paraquat Group G (14)) to ensure difficult to control weeds were controlled and to reduce the risk of resistance developing was implemented on most paddocks.  Typically, the price of these herbicides was between 50% and 300% higher than prior seasons.  Consequently, fallow weed control costs were around 3 times higher than the previous two summers, costing in the vicinity of $200/ha.

Pre-plant nitrogen application during the summer was hindered by the wet conditions, so in many cases was delayed until closer to planting and in-crop.   Following two great seasons in 2020 and 2021, the NW NSW Plains required more nitrogen than ever before, with some of the Western growers purchasing urea for the first time in their farming careers. What a year to do so with 4-digit urea prices!  However, the consequences of not doing so can be seen with some crops lacking nitrogen that will be unable to realise their full yield potential.

An example of a common paddock with a wheat crop currently growing may have produced 5t/ha wheat in 2020 and 3t/ha chickpeas in 2021 with a combined removal of around 225kg nitrogen.  Similar paddocks may have had 100kg nitrogen (200 – 250kg Urea) applied this year, costing around $250 – $300/ha.  More commonly, following average production years; similar paddocks would have around 150kg urea applied at $500/t or $75/ha.

The net price of diesel, our third biggest input, is up around 200-250% this year.  All operations performed on farm use diesel in varying quantities per hectare, without mentioning the increase in domestic freight costs because of the fuel price increase and other factors.  Furthermore, shipping costs have soared, particularly container freight for pulse crops, etc. I estimate the variable costs of growing cereal crops and canola in 2022 to be up 250-300%, and slightly less of an increase for legume crops such as chickpeas and faba beans that do not require nitrogen fertiliser, around a 200% increase.

Despite all of the financial and logistical challenges growers are facing in the northern region this year, it is a great time to be farming and this is a fantastic part of the country to be doing so.  Commodity prices and the ability to get the 2022 crop harvested without being heavily impacted by La Nina / rain / flooding will ultimately determine the profitability of the 2022 crop in the region.

Editor: Bradley Coleman, Agronomist, Coleman Agriculture

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