Our Agribusiness framework includes knowledge sharing across a national team who are passionate about delivering solutions. Please see below three recent headline news stories and what they mean for the agribusiness industry.

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For registered businesses employing working holiday makers, foreign workers will now pay 15% in income tax from their first dollar of wages up to $37,000 p.a., with the normal foreign resident tax rates to apply from $37,001. The ATO requires all businesses employing or planning to employ working holiday makers to have registered by 31 January 2017 (a form and tax table are available on the ATO website). If businesses do not register, employers will need to withhold 32.5% of income paid to foreign workers up to $87,000. The ATO intends to increase regulation and monitoring of taxation relating to foreign workers, with penalties to apply to employers. These changes are expected to impact seasonal farmers, particularly horticultural farmers, who rely on generally low labour rates payable to working backpackers to manage harvest costs.

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Submissions to the Murray-Darling Basin Authority for amendments to the Murray Darling Basin Plan closed on 10 February 2017. The proposed amendments include a reduction to the water recovery target for the Northern Basin from 390 GL to 320 GL. Farmers are still concerned that the reduction target remains too high for their irrigation needs and will continue to impact the viability of agribusinesses and communities in South Western Qld communities.

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The implementation of the Qld Government’s mandated ethanol fuel laws in January 2017 has seen increased demand for grain and corresponding prices for grain feedstock have increased; domestic sorghum prices increased by 5.9% to AUD$232/t in the December 2016 quarter (ABARES, 2017). The availability and price for feedstock generally impacts margins for cattle feed-lotting and other intensive animal husbandry businesses. Appropriate hedging strategies and management of working capital can minimise the impacts and risks to businesses in these areas.

Agribusiness leveraging the success of 2016 for 2017

The 2016 financial year was an outstanding year for many agribusinesses with the exception of dairy and grains. The combination of good seasonal conditions and strong commodity prices allowed agribusiness to capitalise on strong yields. The value of Australian agricultural production exceeded $60 billion in 2016, 16% higher than the average preceding five years (ABARES, 2016).

It is expected that 2017 agribusiness results will not be a repeat of the 2016 success. In the boom and bust cycle of agribusiness, it is suggested that it may take a decade for bumper conditions to return to provide the same strong results of 2016 (Farm Weekly, 2017). It is now that industry participants should leverage positive cash positions to make lasting productivity gains.

One such opportunity is for agribusiness to invest in digital agriculture. Obtaining and sharing productivity data across the supply chain has the potential to increase competitiveness for all. The key to digital agriculture is to understand how to make meaningful and accurate conclusions from it. There are millions of data points that could be collected ranging from soil moisture content and dam levels to production throughput. Identifying the data that is important for each business and then understanding what that means is the next step in business development for many agribusinesses in 2017. Over a quarter of all businesses in agribusiness had introduced innovation as at 30 June 2014 (28%) (ABS, 2015). We expect this innovation trend to continue particularly as the cost of technologies reduce, and the benefits of analysing meaningful data are reflected in agribusiness profitability.

 

Want to know more?

For more information please contact our Agribusiness team.

Jamie Harris, Partner
National Agribusiness Leader
T +61 7 3333 9820
M +61 418 984 694
E jharris

Jason Pietzner, Director
National Agribusiness Director
T +61 7 3333 9842
M +61 403 300 471
E jpietzner