Livestock transport costs hurt profit margins

Shaw’s Transport’s Stephen Shaw, Mansfield, said while some companies might have increased freight costs to keep up, to remain competitive he hasn’t lifted his prices in the last 10 years.

And it’s hurting his hip pocket, but is something he has been prepared to deal with in order to “keep as many people as possible happy”.

Mr Shaw, whose business has been in his family for almost 50 years, said a fuel subsidy of about 16 cents a litre has been beneficial over the years, but it hasn’t been enough to soften the blow of rising prices.

The increasing cost of truck registration has also burdened the company’s profit.

It’s got to a point where he has begun considering increasing his costs.

“A lot of people have been saying I should put my prices up, but my problem is I have a conscience, I don’t want to just put my prices up and say to my customers this is what you have to pay now,” he said.

“But I’ll have to think about it shortly.”

He’s been lucky that he hasn’t had to pay wages to any staff, as he only works with his son James, who runs his own finances.

However Australian Livestock and Rural Transporters Australia (ALRTA) national president Kevin Keenan said It is important for operators to know their own costs and to price in variables such as the cost of diesel, which can vary over time or by location.

“Generally, all operators are affected equally by changes in fuel or rego prices – so the overall price of freight should rise and fall accordingly,” Mr Keenan said.

“This is not always the case though and there can be some lag between cost changes and adjustments to freight charges.”

He said diesel costs have steadily risen by about 30 per cent from historic lows in early 2016, and as they haven’t returned to the highs of 2014, operators should factor in the likelihood of further price hikes.

In 2014, the National Transport Commission (NTC) determined that heavy vehicle operators were being overcharged by 6.3pc every year, and recommended an immediate reduction in both registration costs and the Road User Charge.

“Transport ministers refused to accept the findings of their own agency and instead froze charges, so since 2014, this has resulted in more than $1 billion in overcharging of heavy vehicle operators,” he said.

“If governments want to do something about transport costs, state and territory transport ministers should immediately return to fair cost recovery principles.”

Mr Keenan said customers might be reluctant to pay for increased freight costs, particularly if livestock prices begin to decline, but operators need to adjust rates upwards.

“Undertaking jobs at rates below cost will just make a transport business go broke faster, so ALRTA stresses that operators need to know their costs, anticipate likely increases and factor this into freight rate negotiations.”

Mr Shaw said now is traditionally a quiet time for the business, but this year has been busier than normal.

He has been transporting cattle to and from saleyards, and to and from agistment properties, for drought-affected farmers.

“Normally people have made all of their sales by the end of June for tax purposes, but sales are determined by the season and prices,” he said.

“One particular client backed off a fair bit, so we’ve been carting their stuff around to market and on agistment the last couple of months.”

He said recent rain has lifted prices, and seen more transport required.

“This week I was meant to be doing next to nothing, but now I’m working three days straight,” he said.