Carbon pricing could cut farmers profits by 6%, Redman

Author: Terry Redman
Published on: 08-November-2011

Western Australian farmers could be financially worse off by as much as six per cent from July 2012 when the Carbon Pricing Mechanism (CPM) takes effect.

Agriculture and Food Minister Terry Redman said research showed a typical broadacre mixed enterprise farm business would lose six per cent of its profit margin due to tax on inputs affected by the CPM.

“Recent farm modelling of the impacts of the CPM show that WA farmers will be indirectly, yet negatively, affected when carbon pricing is introduced,” Mr Redman said.

“Some WA farm businesses are financially vulnerable and any additional cost impost that is unable to be offset further weakens the recovery of these businesses.”

It is estimated that tax on inputs affected by the CPM (e.g. electricity) will increase prices on a range of farm overheads and variable costs items.

“With the export oriented nature of WA mixed enterprise farm businesses, these producers will have a limited ability to pass on any additional, indirect costs to their predominantly overseas customers,” the Minister said.

“Without price cushioning, farmers would simply bear the additional small increases in indirect costs, leading to their profit margins being eroded.”

Mr Redman said the Department of Agriculture and Food WA (DAFWA)  research had shown the State’s farmers would not benefit from the Carbon Farming Initiative unless carbon prices were set much higher than so far projected.

“At currently foreseeable prices for carbon, most of WA’s farmland remains best used for agriculture rather than environmental carbon plantings,” he said.

“WA’s soil and projected adverse change in climate suggests an increase in carbon stored in soils remains a technical challenge and economically problematic.”