That’s the view of B+LNZ chief economist Andrew Burtt who says latest data shows that onfarm inflation is running at 16.3% - two and a half times the consumer price inflation rate of 6.7%. The last time on-farm inflation was this high was back in 1981 when it was 17.1%.
Burtt says to make matters worse, B+LNZ is forecasting a 30% decrease in average farm profit based on estimated on-farm inflation of 12–13%, but the latest numbers mean farm profit is likely to fall even further. He says costs increased across the board this year, the largest being interest (+86.5%), which contributed substantially to the overall increase in onfarm 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%,” he explains. “Feed and grazing (+14.8%) and fertiliser, lime and seeds (+14%) were the next two largest increases for the year. With inflation eroding farm profitability, farmers continue to tighten their belts.”
This is the latest in a series of reports highlighting the financial and regulatory pressures facing sheep and beef farmers. B+LNZ chief executive 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,” McIvor 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,” he says.
McIvor says sheep and beef farmers are playing their part to address climate change, improving waterways and protecting New Zealand’s biodiversity. He says B+LNZ 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.”
