Sheep and beef on-farm inflation low

On-farm inflation was 0.4%, according to the latest Beef + Lamb New Zealand (B+LNZ) Economic Service Sheep and Beef On-Farm Inflation Report.

The report identifies annual changes in the prices of goods and services purchased by New Zealand sheep and beef farms. The overall on-farm inflation rate is determined by weighting the changes in prices for individual input categories by their proportion of total farm expenditure.

B+LNZ Economic Service chief economist Andrew Burtt says large falls in interest rates held on-farm inflation at a low 0.4%.

“Of the 16 input categories, prices increased for 12 and decreased for four – fertiliser, lime and seeds; fuel; electricity; and interest – though the decreases were insignificant except for interest, which decreased by 7.2%,” says Burtt.

The most significant price increases were for insurance (+5.0%); repairs, maintenance and vehicles (+4.2%); rates (+3.7%); and animal health (+3.7%). On average these input categories account for 22% in total of farm expenditure.

“Even excluding interest, on-farm inflation was 1.5% – meaning it was already lower than the 2018-19 season, which may have given farmers a small reprieve,” says Burtt.

“Low interest rates continue to be important because not only does interest expenditure account for 14% of total farm expenditure, it is the only expense that has significantly decreased for farmers in recent years.”

The report covers the price of goods and services, not how much farmers spend on those goods and services.

As an example, individual farmers could have higher total interest expenditure due to higher debt levels, but on average will be paying less interest per dollar of debt.

Also, because the report covers the year to March 2020 the prices identified would not have been affected by COVID-19 and Burtt says it’s too early to know what impact the pandemic will have on on-farm inflation figures. 

The full report is available here.