A new tool has been created by Feed Standards Australia amid growing concern about rising fuel prices and their impact on freight costs.
Feed Standards Australia general manager Tim Ford said the calculator would remove uncertainty around fuel levies and support clearer conversations between growers, buyers and transport operators.
“War, oil shocks and global instability can quickly flow through to the cost of moving hay and straw, but uncertainty can be just as disruptive as the price increase itself and can stop hay deals,” Mr Ford said.
“This calculator means an unknown cost can be assessed, and a deal can be negotiated, which is especially important when we have rapidly rising fuel costs. This calculator puts some certainty in place for the industry and gives greater confidence to enter longer-term contracts.”
Mr Ford said a rise and fall mechanism was central to the model.
“You agree to the fodder price and underlying freight rate upfront and whatever the fuel price in the future of the contract, the price can adjust.
“The future fuel price is still unknown, but the way it will be handled is agreed from the start.”
Feed Standards Australia has consulted extensively across the industry and worked with specialist hay traders Feed Central Trading to develop the model.
Mr Ford said Feed Standards Australia had received feedback that many people were resisting the security traditionally offered by long-term contracts because of uncertainty about who pays for increased fuel prices - the buyer, the seller or the carrier - and concern about what happens when the price falls.
“With hay travelling long distances, freight can represent a significant part of the delivered cost. For contracts stretching over several months, that uncertainty can hold up an otherwise workable deal,” he said.
This is the first time the hay and fodder industry has had a dedicated tool for calculating a fuel levy. The model can work with all cargo; however, it has been built specifically for hay and straw freight.
The tool uses an independently published Australian fuel price and establishes an adjusted freight rate that includes a standard carrier rate plus the fuel levy. The levy covers only the change in the fuel portion of the freight rate — not the entire rate.
Mr Ford said the calculator would provide a practical and transparent way to account for changing fuel costs when calculating freight.
“The fuel levy separates the agreed commercial price from future fuel-price movements,” he said.
“Buyers, sellers, carriers, traders and brokers can enter longer-term contracts without needing to predict where diesel prices will be in 6, 12 or 18 months.
“It creates a consistent national fuel levy for the Australian fodder industry with a rise-and-fall mechanism that supports consistent fuel cost recovery.”
For more information go to https://www.feedstandardsaustralia.com.au/fuel-levy-surcharge/.
Feed Standards Australia members can access the model, which is updated weekly. Membership is set at $190 per year per business.
Feed Standards Australia is a part of the Feed Central group of companies, specialising in hay nationally.