Beef and sheep farmers in New Zealand are currently facing the highest on-farm inflation seen in the country since 1981, according to a new report.
The data from Beef and Lamb New Zealand (B+LNZ) shows that on-farm inflation climbed to 16.3% in the year to March 2023, which is more than double the consumer price inflation rate of 6.7%
This record level of on-farm inflation surpasses the 40-year high experienced by farmers in 2022 (10.2%). Sheep and beef farm inputs have now increased by 31% over the last five years.
In March, the company forecasted a 30% decrease in average farm profit based on estimated on-farm inflation of 12-13%, but this latest result means that farm profit is likely to fall even further.
Inflation
“We thought last year was bad, but this is the highest on-farm inflation rate for sheep and beef farmers in 40 years, since 1981–82, when on farm inflation was at 17.1%,” Andrew Burtt, B+LNZ chief economist, said.
“Costs increased across the board this year. The largest increase was for interest (+86.5%), which contributed substantially to the overall increase in on-farm inflation because it comprises 10.9% of total farm expenditure.
“Floating interest rates doubled from March 2022 to March 2023 while fixed and overdraft interest rates increased by around 50%. Feed and grazing (+14.8%) and fertiliser, lime and seeds (+14%) were the next two largest increases for the year.”
As inflation erodes farm profitability, Burtt said that farmers are continuing to “tighten their belts”.
“This will have a flow-on effect to our rural communities as services and farm inputs are reduced.
“With uncertainty over regulations and the economic outlook for New Zealand there is a focus on essential ‘must have’ expenditure on farm,” he said.
New Zealand
B+LNZ chief executive Sam McIvor said that along with the significant financial challenges facing farmers, many are also working to recover from Cyclones Hale and Gabrielle.
He appealed to the New Zealand government to “put the brakes on its raft of environment policy changes”.
“The financial pressure is challenging. A generation of farmers have not operated under this level of inflation and the situation is further exacerbated by unworkable environmental rules.
“When farmers are impacted in this way, it has a knock-on effect to the wider economy including businesses that service farms like vets, trucking companies, shearers and many more. It also impacts businesses where farmers spend their family incomes,” McIvor added.
“New Zealand sheep and beef farmers are playing their part to address climate change, improving our waterways, and protecting New Zealand’s biodiversity. We are asking for urgent changes to flawed government policies and poorly crafted rules.
“The government must get behind the sector, which provides nearly one of every five dollars New Zealand earns from exporting, so farmers can navigate this financially challenging time, plan ahead and ensure their businesses remain sustainable, in every sense of the word,” he said.