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Sheep and beef on-farm inflation up

Tuesday 31st May 2011

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New Zealand sheep and beef farm businesses faced a 4.1% increase in input prices for the year ended March 2011. This was a stark contrast to the year before when farm input prices decreased 2.9%, according to Beef + Lamb New Zealand’s (B+LNZ) Economic Service Movements in Sheep and Beef Farm Input Prices 2010-11 report.

The increase has been driven by the price of fertiliser, fuel and increases in banking interest rates, says B+LNZ Economic Service Executive Director, Rob Davison.

“The price rises for fertiliser and interest have a big impact given they are the largest areas of expenditure on sheep and beef farms.

“New Zealand either imports fertiliser or manufactures it from imported rock. As this has a high imported content, the stronger exchange rate than for the previous 12 months, provided one of the few exchange rate benefits moderating offshore price increases in New Zealand dollar terms. Even so, the on-ground price of fertiliser increased 7.5%.

“Over the last five year period, fertiliser prices have increased 61%, although it was two years ago they were highest at 11% more than now.”

Bank interest rates are the other big expense and the price of interest increased 5.4%. This increase included maturing term mortgages being refinanced at higher interest rates.

Davison said it was fuel that accounted for the single largest price increase during the 12 months to March 2011 – up 14.1% and follows a 9.6% increase last year.

Insurance premiums are up 5.6% and Local Government rates increased 3.5%.

“This was the slowest rate of increase for Local Government rates since 2001-02, but Local Government rates in the past five years have increased 32% – twice the rate of increase of the Consumers Price Index of 16.3% over the same time period."

Calculated over a five-year period, sheep and beef on-farm inflation increased 22.6%.

The Movements in Sheep and Beef Farm Input Prices index is complied by B+LNZ’s Economic Service annually and indicates the rate of on-farm inflation – that is, changes in prices paid for farm inputs. This index isolates the categories of farm expenditure where the input price changes have occurred during the 12 month period. On-farm inflation is different to total farm expenditure, which also takes into account the volume of inputs used on farm.

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