An increasingly complex and volatile global farm input market is making it imperative for Australian farmers to have in place good purchasing strategies, while focusing on ways to conserve soil nutrients and input use, according to a new industry report.
The report, Efficiency with farm inputs - a recipe for productivity, by agribusiness firm Rabobank, says more efficient use of farm inputs - including fertilisers, crop protection chemicals, seeds and fuel - would be essential in ensuring profitability, driving productivity growth and improving environmental sustainability of farm businesses.
Report author, Rabobank senior analyst Michael Harvey said that with farm inputs a vital component of modern production systems, all farmers in Australia were exposed to the dynamics of procuring farm inputs.
"These markets have been evolving and becoming more sophisticated, which is altering the business landscape for farmers as end users," he said.
Mr Harvey said improved soil nutrient management would be critical to meeting the challenge of feeding the growing global population.
"To meet the challenge of feeding nine billion people by 2050, agricultural production volumes need to increase by more than 70%," he said.
"Australia will play a large role as a global food producer; however the extent of this role will be determined by the innovation and productivity improvements that farmers are able to make."
"Australia is well positioned to increase production, but farmers are going to have to manage their farm input purchasing strategies and usage. The importance of using farm inputs more judiciously is three-fold: improved productivity, improved profitability and positive environmental outcomes."
Australia relies heavily on global markets for its inputs, which makes them a price taker in the market and creates challenges around seasonality and the long lead times for sourcing products, the report said.
"The international marketplace makes it important for farmers to have advanced sourcing strategies in place, so they can make informed decisions about when and how to buy their fertiliser, crop protection chemicals, seed and fuel," Mr Harvey said.
Global input prices are expected to remain above long-term averages, underpinned by the elevated base cost of raw materials. Similarly, oil prices are forecast to remain structurally higher into the medium term, as global demand remains high, the Rabobank report said.
"With farm input prices set to remain structurally higher, farmers need to focus on ways to manage the efficient use of fertiliser, chemicals and fuel on-farm," Mr Harvey said.
"Having nutrient budgets and nutrient management plans in place, precision agriculture technologies to pinpoint application and no-till or minimum till cropping, are just some of the strategies many farmers are adopting to manage their fertiliser use."
Farmers' input use is not only being driven by their relative costs and the need to increase productivity, but increasingly by environmental factors.
Mr Harvey said while there were no substitutes for the main nutrients, farmers could take action on-farm to minimise fertiliser use.
"By putting a price on carbon, farmers in Australia are being encouraged to transition to a low carbon system and improve efficiency. There are many actions that can be taken to reduce emissions, and the efficient use of nitrogen fertilisers is one of these," he says.