Producers still face high production costs, soaring insurance premiums, worker shortages and being price-takers in Australia’s highly concentrated grocery market.
The Reserve Bank cut the cash rate from 4.35 per cent to 4.1 per cent on Tuesday, February 18, the first reduction since November 2020.
The move was cautiously welcomed by NSW cropping and livestock farmer John Lowe.
“It will mean a small reduction in our interest payments, and hopefully the other side of it is our suppliers might have a slightly better cost structure as well,” Mr Lowe, who is also the NSW Farmers Business Economics and Trade Committee chair, said.
“In itself, it won’t make a huge difference.”
A number of Australian banks, including the big four, have agreed to pass on the rate cut in full, but borrowers won't likely see the change until later this month.
“Like petrol prices, when they go up, they go up instantaneously,” Mr Lowe said.
“When it starts going down again, it’s a bit sticky.”
Likewise, the costs of machinery, fertiliser, basic chemicals, fuel and wages were all among rising input costs likely to be unmoved by a 25 basis point rate cut.
Market concentration continued to be a huge issue, Mr Lowe said, with dominant buyers such as Coles and Woolworths, large agribusiness players on the supply side and further concentration in input markets like agri-chemicals and materials.
“We rely on them to realise that we need to make a profit as well to stay in the game,” he said.
“We need them, but they need us ... We hope.”
The Federal Government’s mandatory food and grocery code of conduct is set to begin in April, but Mr Lowe wasn’t holding his breath.
“We’ll have to suck it and see,” he said.
Developments in robotics, artificial intelligence, satellite imaging and remote sensing would be key to viability and attracting the next generation of farmers to the industry.
“It’s on the cusp of some really interesting innovations, and we’ll require higher levels of skill and education,” Mr Lowe said.
“We’ve got to make it so people think they can make a buck out of it, and that’s probably our problem going forward.”
NSW Farmers president Xavier Martin hopes the rate cut will offer some small relief to the pressures facing farm businesses.
“We all need a farmer three times a day, every day, and we simply cannot let inflationary settings push any more farmers out of the game,” he said.
Mr Martin urged banks to pass on the rate cut as soon as possible to ease pressure on the agricultural sector.
“Aussie farmers must see relief from these rate cuts across their debts, so they can keep on farming for decades to come.”
– with AAP.
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