In­dus­try View

Ef­fect of lower far­m­gate prices

Farms & Farm Machinery - - Contents -

The re­cent down­grade in dairy prospects and the sub­se­quent in­come re­duc­tion for Aus­tralia’s dairy farm­ers have a knock on-ef­fect through­out the com­mu­ni­ties and busi­ness that ser­vice these mar­kets.

As farm­ers lament the re­duc­tion in their in­comes, there is also a dev­as­tat­ing ef­fect on the busi­nesses re­ly­ing on these farm­ers to make a liv­ing.

Farm ma­chin­ery deal­er­ships in the dairy ar­eas of Aus­tralia are brac­ing them­selves for a down­turn in sales and ac­tiv­ity in their busi­nesses, but these com­pa­nies are of­ten for­got­ten in the head­lines.

Spare a thought for the lo­cal cloth­ing store or ag sup­plier in towns se­verely af­fected by a drop in milk prices at farm gate. These busi­nesses re­ceive lit­tle to no sup­port from the Govern­ment and their voices are rarely heard in dis­patches from farmer lobby groups or lo­cal politi­cians.

An av­er­age farm ma­chin­ery dealer em­ploys 10-20 highly skilled peo­ple, needs in ex­cess of $1 mil­lion in in­ven­tory or loans to cover its stock, and has work­ing cap­i­tal re­quire­ments in ex­cess of $300,000 a month just to keep the doors open.

Con­trary to pop­u­lar be­lief, ma­chin­ery deal­ers run on very tight mar­gins, and their cost of staff have grown over the past few years as skilled work­ers have bolted for the greener pas­tures of the min­ing boom.

When their cus­tomers are do­ing it tough, so are they.

The ma­chin­ery sec­tor is a highly com­pet­i­tive mar­ket and of­ten trac­tor sales are lost over a few dol­lars, so the pres­sure to sur­vive is very high – in fact so high that to­day we have fewer than 700 deal­ers across the coun­try, when 20 years ago there were over 2000.

Be­ing a dealer is not for the faint hearted.

In more pos­i­tive news, the trac­tor mar­ket across the coun­try is hold­ing up thanks pre­dom­i­nantly to new trac­tor sales in New South Wales, Queens­land and Western Aus­tralia.

The horse­power de­mand re­mains high in the above 100hp mar­ket, with 14 per cent growth in this seg­ment of the mar­ket, com­pared to the life­style mar­ket (un­der 40hp), which is down 16 per cent.

The 40-100hp mar­ket is re­main­ing steady, although with the re­cent news we ex­pect a drop in this seg­ment.

As farm­ers are look­ing to re­duce in­put costs such as feed in­puts, we are hop­ing for an uptick in hay equip­ment dur­ing the sec­ond half of the year, with farm­ers seek­ing to grow as much of their own feed as they can.

The sea­sonal con­di­tions have taken a turn for the bet­ter across the coun­try, which will hope­fully help some prospects and keep sales rolling along at a steady pace.

The rain has cer­tainly helped the out-front mower mar­ket, which has risen 12 per cent so far this year, and helped off­set the life­style mar­ket for these deal­ers.

“We are in this to­gether,” is our mes­sage. More than ever, lo­cal deal­ers and busi­nesses need as much sup­port from their districts as pos­si­ble.

Let’s not for­get that lower farm gate prices have an ef­fect on the wider com­mu­nity

RICHARD LEWIS is ex­ec­u­tive di­rec­tor of the Trac­tor and Ma­chin­ery As­so­ci­a­tion of Aus­tralia. He can be con­tacted on 0421 847 872 or via email at richard@iron­cap­i­

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