Carbon Tax: Is There Devil In The Detail?

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The Federal Government Finally announced its plans for a carbon tax. The tax (to be imposed from July 2012) will be administered on a per metric tonne basis starting at $23, and is scheduled to remain around this level for three years. Bankwest is now offering tips for understanding the carbon tax.

Bankwest has been providing services to Rural and Agribusinesses for over 100 years. Bankwest has learned many things in that time, but above all what Bankwest has come to understand is that people need banking products that are customised to meet the unique challenges of their industries.

Find the latest rural and agribusiness insights in this story from Bankwest

After 2015 carbon pricing will move to a cap and trade system determined by the international market. Economically a cap and trade system has been deemed the most efficient way to drive market behaviour – the eventual level of taxation will depend on how effectively the market can reduce emissions, and could move up or down as a result.

So what does this mean for the agricultural sector? The impact of the tax is likely to be minimal for farmers, as both agriculture and fuel used in agricultural production have been excluded from the scheme. The Australian Farm Institute estimates that the tax will cost producers $1,500 annually (equivalent to a 2.4% reduction in farmers' net income).

However, it is likely further impact will be felt by farmers, mainly in the form of higher input costs not exempt from the tax such as freight, fertiliser and chemicals.

There is also a grey area with regards to service providers. Some contractors do not qualify for the exemption and energy intensive processors of food products (meat and dairy for instance) are seeking urgent clarification on their liabilities. Because farming involves the trade of commodities, this effectively precludes producers from passing on increased production costs further down the supply chain.


Bankwest is the company providing this information.


What a month for wheat! The unwinding of fund positions, improved weather and some extra hectares have all driven Chicago down by a whopping 150c/bu. The good news is the slide seems to have halted as fundamentals return. Locally the basis sits at +80, and $270 to $280/t is the money – profitable numbers. The unknown European supply will be the key driver of price in the short term.


Malt Barley has been relatively stable, with Canadian and European production issues driving the market. However, the feed price has unwound in line with feed wheat values. The commencement of the Russian and Ukrainian harvest will likely put pressure on prices as a reasonable tonnage is expected from the region.


With US soy and Canadian canola crops set for a soft finish, it could be a difficult couple of months ahead for canola. A large South American crop is also likely to contribute to a continued unwind in local values. On the flipside any downside in weather conditions in the US corn and soy crop could improve prices in the short term.


The resumption of the live cattle trade to Indonesia has been the big news of the past fortnight, but this has not had an immediate impact on the market with local prices remaining static as producers wait for the supply chain to fill up. The US economy remains a concern for Australia's chilled beef exports, while lamb prices are tracking in line with last year’s levels. The sheep price overall is unwinding as re-stocker pressure runs off and the quality of offerings approach seasonal lows. The good news is that the downward run over the past 60 days appears to have come to an end.


The EMI has continued to unwind over the past three weeks and currently sits at 1400 cents. Better news for Australian growers is that European buyers have increased their demand by 104% year on year. China remains Australia's key export destination (consuming 73% of the clip) but the upsurge in European demand is seen as a positive step at the finer end of the market.

Important things you should know: Bank of Western Australia Ltd ABN 22 050 494 454 AFSL 236872. Any advice given is of a general nature only and is not based on any consideration of your objectives, financial situation or needs


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Peter Rowe
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