Friday, March 29, 2024

New contractor-farmer accord ready in time for spring sowing

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Rural contractors urged to charge realistic – and higher – prices to buffer against input cost volatility.
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A new accord between rural contractors and landowners that accounts for input cost volatility should be ready in time for spring sowing.

The contract was created as a way to more fairly allocate the costs of fuel, fertiliser and other inputs after they skyrocketed last season from when crops went in the ground to when they were harvested.

It saw many contractors struggle to break even by the time the crop was ready for harvesting.

The accord was created by Rural Contractors New Zealand (RCNZ) and Federated Farmers after a meeting in Hamilton in May this year, when Waikato contractors said their costs had risen by 25%.

RCNZ chief executive Andrew Olsen updated contractors on the progress at a roadshow meeting in Hamilton.

“The opportunity is to ensure that it’s not only contractors that do well in their business but making sure their customers do as well. We have to keep the farmers alongside this,” Olsen said.

“It started with farmers saying it can’t be a race to the bottom. We need to find a way make sure that costs entering the system are dealt with appropriately.”

The roadshows gave confirmed that costs are a big issue for rural contractors and contracts are needed to reflect scalability in how costs are being treated by contractors and farmers, he said. 

“That’s our focus in the next weeks and months – Federated Farmers and RCNZ wrapping education around this issue.”

The roadshow was one of three held in the North Island, with the other two having taken place in Palmerston North and Whangarei.

NZX Head of Insights Julia Jones told contractors they needed to know the numbers that drive their business and share them with their farmer clients.

Jones said they need to know the margin they are making.  “What revenue do you get from a job? No one wins if you are not making money.’’

As a lifestyle block owner in the Waikato, Jones said, she is herself a user of the services provided by the $2 billion rural contracting industry.

“I tell my rural contractor to charge me more,” she said.

 Jones said rural contractors need to develop an ethos about charging appropriately and realise that “you don’t have to do business with everyone”.

World food prices are going through the roof and no matter how global tensions play out, people will always need to eat. Rural contractors are key to that happening, she said.

“Your role isn’t going to go away but you do need to evolve and stay relevant.”

NZX is being contracted to deliver a cost reference point to RCNZ and Federated Farmers.

Olsen said it will be available to RCNZ members via the organisation’s website. It will allow them to track fuel and fertiliser costs and help them with their planning.  “Other cost reference points may be added in time if we can get meaningful independent data.”

They will also be regularly updated and monitored to reflect the farming environment.

Waikato Federated Farmers arable chair Keith Holmes, who was part of initial meetings earlier this year on cost issues, told the Hamilton meeting he fully endorsed the accord being developed.

 “Farmers and rural contractors need each other,” he said.

“My plea is that you take on board what Julia and Andrew are saying and do your numbers and don’t get yourself into a situation where you put yourself at risk by having a handshake deal, particularly when you are trading maize.

“Make sure it’s a legal document through Federated Farmers or Rural Contractors.”

 The North Island roadshows will be followed by meetings in Gore and Christchurch before the end of the month. 

They also include presentations from the Ministry for Primary Industries and Growsafe’s Dean Bowden, who provided a welcome update to spraying contractors on the requirements of new standards for the storage, transport and use of agrichemicals.

“Chemical storage and labelling is a key area for our members,” Olsen said.

“It’s in transition and there are some hard-stop deadlines in 2025 which we and Growsafe will continue to emphasise.”

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