B+LNZ: Farmers facing highest on-farm inflation since early 1980s
Beef + Lamb New Zealand’s (B+LNZ) Sheep and beef on-farm inflation report shows a 40-year high at 16.3 percent, two and a half times the consumer price inflation rate of 6.7 percent.
In March, B+LNZ forecast a 30 percent decrease in average farm profit based on estimated on-farm inflation of 12–13 percent, but the latest numbers mean farm profit is likely to fall even further.
The jump to 16.3 percent for sheep and beef farm inputs between March 2022 and March 2023 follows a 10.2 percent increase over the previous 12-month period and is up 31.1 percent over the last five years.
“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 percent,” says B+LNZ Chief Economist Andrew Burtt.
“Costs increased across the board this year. The largest increase was for interest (+86.5 percent), which contributed substantially to the overall increase in on-farm inflation because it comprises 10.9 percent of total farm expenditure.
“Floating interest rates doubled from March 2022 to March 2023 while fixed and overdraft interest rates increased by around 50 percent. Feed and grazing (+14.8 percent) and fertiliser, lime and seeds (+14.0 percent) were the next two largest increases for the year.”
With inflation eroding farm profitability, farmers continue to tighten their belts. Burtt says debt servicing is a non-negotiable, which means farmers are looking to cut back in other areas of farm expenditure.
“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 says.
This is the latest in a series of reports from B+LNZ that highlight the financial and regulatory pressures facing sheep and beef farmers.
B+LNZ CEO Sam McIvor says the significant financial challenges facing farmers, with many also working to recover from Cyclones Hale and Gabrielle, are another reason the Government must 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,” he says.
“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.
“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.”
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