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Wage Costs and Labour Issues Force Agencies to Sell

Wage Costs and Labour Issues Force Agencies to Sell


Wage Costs and Labour Issues Force Agencies to Sell

Article by: Hari Yellina

Mark Allison, CEO of Elders, believes that generational transition in the farm services industry, combined with growing wage costs and labour shortages, will force an increasing number of independent agents to sell up. In the first half of current fiscal year, the 182-year-old agribusiness received offers from 39 different companies before making five purchases. With another 17 active prospects now on the radar, the company’s slow expansion goal is poised to pick up significantly in the following six months. Esperance Rural Supplies in Castletown, WA – which accounts for around 20% of Elders’ retail revenues – Sunfarm in Queensland’s horticultural hotspot, Bundaberg, and YP Ag Services in South Australia are among the most recent shop acquisitions.

Around 620 stock and station agencies and agricultural services businesses are operated by independent family-owned or regional company groups across Australia. They join the likes of Elders and Nutrien Ag Solutions, as well as a number of smaller companies including Delta Agribusiness in NSW and members of the national AgLink farm supply network. Despite the upbeat agriculture atmosphere and promising seasonal and market forecasts, the good times have not been without stress and business hurdles. Since 2020, much improved seasons have resulted in lower animal numbers for sale, reducing livestock agent commissions, but severe regional labour shortages have forced many business owners to work harder to service their farmer customers.

The coronavirus pandemic has also resulted in fewer employees reporting to work on a regular basis, decreased product supply line reliability, and a lot of social distance and workplace health precautions to work around. “During difficult times, the rural services business has had to work extremely hard to get items on the ground and keep up with some remarkable demand,” Mr Allison added. Under the conditions, he believed agriculture was getting “quite excellent value” from its service sector, but it wasn’t easy or cheap. He stated, “We’ve already witnessed some pay inflation.” “There’s a lot of competition for personnel, and it’s not just for people with technical skills.”

“If someone has some retail experience and enjoys the offer, you’re just as likely to lose them to Bunnings or Woolies in smaller communities.” “Even mom and dad farmers are so busy these days on their own farms, there aren’t many of them accessible to fill gaps in our stores.” Elders wants to expand on its own commercial momentum, making itself “a firm people want to join,” after posting a 34 percent increase in net profit after tax to $91.2 million this week. According to last year’s Roy Morgan industry risk survey, the company has also been delighted to tout its standing as regional Australia’s most trusted agriculture brand.

Despite the fact that acquisitions were always made “at low multiples,” there was still a lot of interest from potential new businesses to join the company. After the Nutrien merger in 2019, numerous members of the Ruralco and CRT agricultural supplies groups departed that network, giving Elders an extra footprint. Several of the company’s recent purchases have been regional real estate companies, but it has also launched six new points of presence in the last six months as part of an effort to acquire more property sales and management opportunities. Real estate gross margins contributed 10%, or $33.3 million, to the company’s total gross margin of $326 million, up 37 percent from the same period last year. The biggest gross margin performers were agency services, up 11pc to $82m and agricultural chemical sales, up 62pc to $79m.