On-farm inflation drops to 2.8%

According to Beef + Lamb New Zealand’s (B+LNZ) latest Sheep and Beef On-farm Inflation report, 2023-24 recorded a 2.8% inflation rate.

While this marks a significant decrease from the previous year's 16.3% inflation rate, the report highlights that farm input prices remain high, continuing to put significant pressure on farm profitability.

“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” says Kate Acland, chair of B+LNZ.”

For the past three years, sheep and beef farmers have grappled with high inflation, and input prices have risen by 32% between 2021-22 to 2023-24. 

Although the rate of inflation has slowed, input prices have continued to increase, just at a more modest rate. Farmers continue to face substantial cost increases, particularly in key areas such as interest, insurance, and animal health.

Interest rates remain one of the main drivers behind on-farm inflation, with a 12% increase in interest costs contributing 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. 

Insurance costs rose by 8.7%, while animal health expenses increased 8%, further straining 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.

“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,” says Acland.

B+LNZ is forecasting that sheep and beef incomes will be 54% lower this year and most farmers will not make a profit this year. A key driver of this fall in profitability is increased costs, coupled with softer prices for sheepmeat. 

On-farm inflation was lower than consumer price inflation, which was 4% between March 2023 and March 2024.

However, the ongoing high costs of essential farm inputs highlights the challenges faced by sheep and beef farmers.

B+LNZ’s report shows the importance of understanding that while the rate of price increases has slowed, significant inflation over recent years and high-cost levels continue to pose financial challenges for farmers.

The report provides a detailed analysis of the changes in farm input prices and their impact on farm expenditure, offering valuable insights for farmers navigating these economic pressures.

“Farmers are still feeling the squeeze from high interest rates and other essential expenses. Our focus remains on supporting farmers through these tough economic conditions and advocating for measures that can help alleviate some of these financial pressures.” adds Acland.