With each farm input operating in its own market and costs varying between them, an overall picture can be hard to decipher in volatile and uncertain times.
For example, in September, wheat prices increased up to 26 per cent against last year and urea costs rose 62pc over the same timeframe.
Cereal hay prices varied quite a bit, with farmers in some regions paying more than last year, and others paying less.
Bucking the trend however, temporary water prices continue to sit below long-term averages.
To help provide a simple, industry-level view of net changes in cost pricing, Dairy Australia launched the purchased inputs price index (PIPI) in its September Situation and Outlook report.
The PIPI plots the movement of key input prices across the last decade, based off weightings established from the Dairy Farm Monitor Project (DFMP) and regular price reporting in the monthly Production Inputs Monitor (PIM).
While the original index captures a decade worth of input cost data, a steady rise of farm costs can be noted in the past year with some volatility arising in recent months.
As the index particularly captures the feed concentrate, fodder, fertiliser and fuel markets, this movement can be largely attributed to what's happening in the feed and fertiliser space.
There is currently a limited supply of grain globally.
Hot and drought conditions across large parts of the northern hemisphere during spring and summer reduced grain yields for export, with some countries enforcing export bans worsening the situation.
With this product recently coming online, most global demand moved away from Australia, which is on track for another bumper harvest during the upcoming months.
Whilst strong supply often softens domestic pricing, the realignment of global demand for Australian grain is likely to keep prices elevated.
Record high inflation and weakened currencies have stifled importing across the world, creating a period of quieter demand for fertiliser.
Additionally, in a similar sense to grain markets, tight supply is also a common theme within the fertiliser industry.
Rising natural gas prices, particularly in Europe, have been a significant constraint to fertiliser production.
Additionally, China continues to restrict phosphate and urea exports to mitigate domestic pricing and ensure supply for local farmers, while product from Russia and Ukraine is also relatively inaccessible.
Demand for fertiliser, particularly urea, has been robust across Australia, particularly in the lead up to spring with wet and warm conditions forecast.
The challenge for farmers, however, has been the ability to get onto waterlogged paddocks.
Many have had to reduce or skip applications, which is likely to lower quality and quantity of feed produced on farm.
Following on from a previously wet season, above average rainfall has ensured that water levels in all mainland storage sites are above last year, with some spilling already.
Most of this has been driven by two separate La Nia events and a negative Indian Ocean Dipole.
Strong water availability continues to suppress temporary water prices, as irrigation is rendered unnecessary.
Plentiful pasture growth has softened fodder demand, particularly as many farmers try to make as much homegrown feed as possible.
In regions where conditions have been drier, however, there has been increased purchasing.
As such, hay prices have remained relatively steady in some regions, while ranging slightly above last year in others.
While less hay is anticipated to be produced this season, wet weather conditions are likely to see a substantial amount of grain be downgraded and potentially cut for hay during the upcoming harvest period.
Silage and pasture quality are also in question as farmers struggle to get into paddocks or avoid causing significant damage to them.
Nevertheless, demand for hay is likely to remain subdued in most regions and could hold prices steady.
While hay and temporary water prices appear to sit on the other end of the spectrum compared with the likes of grain, fertiliser, and other cost items such as fuel and chemicals, the latter items weigh heaviest on farm margins.
Together, these components represent more than half of total farm costs.
Continued wet conditions across much of Australia are expected to keep both temporary water and fodder prices below average, but a volatile global environment continues to influence grain and fertiliser markets.
Farmers can receive regular PIPI updates by subscribing to the monthly production inputs monitor https://www.dairyaustralia.com.au/industry-statistics/industry-reports/production-inputs-monitor or access the quarterly Situation and Outlook reports via the Dairy Australia Website: https://www.dairyaustralia.com.au/SandO.
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