Freight costs cripple Aust competitiveness

Freight costs crippling Australian competitiveness

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Freight and logistics have been identified as a major hurdles in ag production.

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FREIGHT and logistics have been identified as the largest single cost item in the production of many agricultural products, leading 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 per cent of gross income, and fruit and vegetables at 21pc," said Mr Harvey.

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"By comparison, poultry a domestic market, has the lowest relative farm freight costs, totalling 1pc 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," he said.

"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," Mr Mahar said.

"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 commodities to market.

The domestic analysis, excluding poultry as competition with overseas producers is negligible, is complemented with research of international agricultural supply chains to benchmark Australia's performance and its ability to compete on agricultural transport costs.

The beef case study of an operation at Dalby, Qld, shows cattle are transported 240 kilometres by road to an abattoir in south east Qld.

Frozen meat is boxed and palletised at the abattoir and loaded into a refrigerated shipping container, which is delivered 170km to the 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 $7380 - at an average cost of approximately $343/tonne.

The cost to deliver to port (excluding shipping costs) is $2720.

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.

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