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Agribusiness investment confidence has surged in the wake of a record grain harvest, but sky-rocketing input costs, including fuel, fertiliser and chemicals, have meant the cost of production is set to soar in 2022 and many farmers are facing immediate cash flow problems.
Rabobank has revealed that 40% of farmers across Australia plan to increase their business investment this year, with WA farmers the most keen to buy more land. However, banks are likely to be more cautious in assessing the ability of farmers to pay the loan off in an environment of high input costs and rising interest rates.
A study undertaken of 1000 farmers across Australia reveals farm infrastructure, new machinery and equipment topping the investment list. However, strain on the supply chain means potential long wait-times for delivery. This can have ramifications for tax planning and those farmers planning to utilise the instant asset write-off to minimise their taxable income in 2022. What is an immediate solution to make the most of the record harvest, while facing rising production costs?
I recommend creating or review your cashflow budget.
Your cashflow budget will forecast your future income and expenditure, revealing any upcoming months where you may fall short of cash. Having a cashflow budget which can be quickly reviewed and adjusted will provide you with the peace of mind in knowing you can meet immediate cashflow obligations regardless of rising input prices.
It’s also important to work with a cashflow budget in relation to your tax planning, if supply chain issues impact the delivery of machinery and equipment purchases.
Finally, if you are considering purchasing new land, the banks will be looking at a cashflow forecast testing your budget with higher interest rates, in line with anticipated interest rate rises over the next 4-5 years.
If you’d like to work with me in creating a cashflow budget, or in reviewing your current cashflow budget, click the button below and I'll give you a call to discuss.
Best wishes,
25th March 2022
DUE to rising gas and shipping prices, the high cost of fertiliser is not expected to significantly decrease this year with the trend to continue into 2023, according to National Australia Bank (NAB) agribusiness economist Phin Ziebell.
“It predates the Ukraine-Russia tensions and starts to go back to the beginning of the pandemic when we saw some really aggressive price rises in fertiliser...the high global shipping costs has just compounded these issues.”
In Australia Rabobank said 40pc of farmers planned to increase their business investment in 2022.
...Rabobanks survey of about 1000 producers found farm infrastructure topping the investment spending list, followed by new machinery and equipment and a growing commitment to new technology.
Cashflow budgeting and forecasting is crucial for farming businesses. Smith Shearer assist agribusinesses and family farming businesses across Esperance, Ravensthorpe and surrounding regions to manage their farm income and expenditure, and to grow their farming businesses.
If you have any questions for me, or would like me to address a topic specifically, please email me directly at melissa@smithshearer.com.au. Alternatively, complete the form below and I'll be in contact.
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