AgriCultivate Issue 1672022: Many growers took out grain swaps at the end of 2021, when prices were (at the time) at record highs, as a strategy to protect revenue against potentially declining commodity prices. Then Russia invaded Ukraine, and - along with other contributing factors - grain prices continued to soar. Now some growers are overdrawing on their credit limits and are having to buy back their swaps at a loss.
If you haven’t heard of Primary production averaging (or your ‘five-year average’) before, you’re not alone. It’s a specialised area of agribusiness taxation. If your Accountant doesn’t specialise in primary production accounting, they may not know how to use your five-year average to your tax advantage, ensuring your maximum cashflow is kept in your business.
See our breakdown of the tax measures impacting small business in Australia.Too many farming businesses are operating under a structure that doesn’t offer them risk protection and future opportunities.
Seeding is underway across the region, and growers are excited by the recent rains. Some farmers are reporting 160mm + across the farm over 48 hours, creating ideal conditions for comfortable seeding. Many growers appear to be turning to canola this year, with prices in Australia at record highs, (exceeding $1,000 a tonne over the past six months). Canola on the world market is now worth $1,184.70 CAD per tonne, according to the Canada Price Index, which has almost doubled from about $680 a year ago.
The ATO have recently begun reviewing new legislation regarding a trustee’s ability to distribute trust income across family members with lower tax rates.
We initially discussed these rulings with you in our blog post on 28th March. Since then, the ATO have received a significant amount of feedback from Accountants across Australia in regard to a trust operator’s tax planning.
Western Australian farmers and agribusinesses have responded to the 2022-23 budget with mixed reactions. While there’s support for growers looking at carbon and biodiversity, many are questioning the government’s commitment to freight corridors, input supply chains and biosecurity.
It’s the final week of March, and the outlook for grain producers across the region continues to be one of promise as speculation of continued increases to wheat prices continue. While the Ukraine-Russia conflict looks to impact grain exports from the region across the longer term, there is now also murmurs of major problems with China’s winter crops. Although China produces on average 5.5 times the amount of wheat Australia does, to meet their consumption demand, they are willing buyers of Australian wheat. This bodes well for the continued demand for our wheat for the remainder of 2022 and into 2023.
With fertiliser prices reaching never-before-seen highs, and the cost of fuel soaring, it’s no wonder many farming businesses across the region are concerned about immediate cashflow in the lead-up to seeding.