Australia: Freight costs are crippling competitiveness

Freight and logistics have been identified as the largest single cost item in the production of many agricultural products. This fact has led to concerns about Australia’s competitiveness on the international commodities market.

A report by Deloitte Access Economics, commissioned by AgriFutures Australia, investigated farm transport costs from paddock to port for a sector that sees roughly two-thirds of food and fibre exported.

AgriFutures Australia managing director, John Harvey, said freight costs were critical to maintaining Australia’s global competitiveness and would 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%. By comparison, poultry a domestic market, has the lowest relative farm freight costs, totalling 1% 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.”

Mr Harvey said the report showed Australia has comparatively higher freight costs for many of its key commodities, compared to international competitors: “It’s hurting our bottom line. Strategic planning and regulatory framework are required to ensure infrastructure can be efficiently utilised by industry.”

National Farmers’ Federation chief executive officer, Tony Mahar, said the supply chain research provided 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. 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.”

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.

Source: goodfruitandvegetables.com.au  via www.freshplaza.com