Freight costs drive global performance for Australia’s agricultural commodities
29 May, 2019
Media release from AgriFutures Australia:
Freight costs continue to dampen Australia’s competitiveness on the international commodities market with a new report out today showing that logistics are the largest single cost item in the production of many agricultural products.
AgriFutures Australia commissioned Deloitte Access Economics to investigate farm transport costs from paddock to port for a sector that sees roughly two-thirds of food and fibre exported.
John Harvey, AgriFutures Australia Managing Director said that freight costs are critical to maintaining Australia’s global competitiveness and will continue to impact agriculture’s export performance into the future.
“In Australia, freight costs are highest for grains at 27.5% of gross income, and fruit and vegetables at 21%,” said Mr Harvey.
“By comparison, poultry a domestic market, has the lowest relative farm freight costs, totalling 1.0% of gross income.
“Knowing how much farmers pay for transporting their produce to consumers is crucial to measure the competitiveness of Australian farmers and to find out where the transport of agricultural goods faces pinch points and bottlenecks. The report shows that Australia has comparatively higher freight costs for many of our key commodities compared to our international competitors and it’s hurting our bottom line,” said Mr Harvey.
“Strategic planning and regulatory framework are required to ensure infrastructure can be efficiently utilised by industry,” said Mr Harvey.
Tony Mahar, National Farmers’ Federation, CEO says the supply chain research provides a benchmark of Australia’s performance and its ability to compete on agricultural transport costs at a global level.
“NFF welcomes AgriFutures Australia’s work in this space as it gives us solid data about the agricultural sector and challenges faced by different industries,” said Mr Mahar.
“It is critical to look beyond the ‘now’ to consider future agricultural freight issues and to highlight possible options for potential improvement in transport infrastructure and regulation within the agricultural sector.”
The research analysed the freight costs facing Australian farms when moving commodities from farm to processor, port and/or domestic market and generated producer case studies, from five major commodity groups including beef, milk powder, canola, cherries and poultry, demonstrating the unique supply chains and costs involved in moving a range of commodoties to market.
The domestic analysis, excluding poultry as competition with overseas producers is negligible, is complemented with research of international gricultural supply chains to benchmark Australia’s performance and it’s ability to compete on agricultural transport costs.
The beef case study of an operation at Dalby, Queensland shows cattle are transported 240 kilometres by road to an abattoir in south east Queensland (location unspecified).
Frozen meat is boxed and palletised at the abattoir and loaded into a refrigerated shipping container, which is delivered 170km to Port of Brisbane by road and shipped about 9000km to South Korea.
The total estimated freight cost incurred in delivering one container-full of frozen beef to Korea is $7,380 – at an average cost of approximately $343/tonne. The cost to deliver to port (excluding shipping costs) is $2,720.
More case studies can be found in The Impact of Freight Costs on Australian Farms report produced under AgriFutures Australia’s National Rural Issues Program.