The rate of on-farm inflation in New Zealand has slowed to 2.8% but farm input prices continue to put pressure on profitability.
That is according to the latest Sheep and Beef On-farm Inflation report from Beef and Lamb New Zealand (B+LNZ).
Although the 2023-2024 inflation rate marks a significant decrease from the previous year’s 16.3%, the report highlights that farm input prices remain high.
“While it is positive that inflation is trending downwards, the reality is that times are tough, the cumulative impact of high input prices over recent years is significant,” Kate Acland, board chair of B+LNZ, said.
In the three seasons from 2021-22 to 2023-24, beef and sheep farmers have faced a 32% increase in farm input prices.
New Zealand
B+LNZ said that farmers continue to face substantial cost increases, particularly in key areas such as interest, insurance, and animal health.
A 12% increase in interest rate costs contributed half of the overall 2.8% inflation rate in the last year, as borrowing is a significant item for farming businesses.
High interest costs have been especially difficult for farmers, impacting their cash flow and profitability, B+LNZ said.
The report shows that insurance costs rose by 8.7%, while animal health expenses increased 8%, heaping further pressure on farm budgets.
One area where farmers found some relief was in the cost of fertiliser, lime, and seeds, which decreased by 4.2%.
These persistent price increases have had a massive negative effect on farm profitability and financial stability for New Zealand farmers.
Incomes
B+LNZ said that its latest report shows the importance of understanding that while the rate of price increases has slowed, significant inflation over recent years and high price levels continue to pose financial challenges for farmers.
The group has reiterated its forecast that sheep and beef farmer incomes will be 54% lower this year and most farmers will not make a profit this year.
“Farmers are currently under enormous pressure financially, but we recognise the impacts are being felt widely, the knock-on effect this has on rural communities and regional towns is huge,” Acland said.
On-farm inflation in New Zealand was lower than consumer price inflation, which was 4% percent between March 2023 and March 2024.