Beef + Lamb New Zealand (B+LNZ) has released its latest Sheep and Beef On-farm Inflation report, revealing a 2.8 percent inflation rate for 2023-24. This marks a significant drop from last year's 16.3 percent, yet farm input prices remain high, continuing to strain 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, Board Chair of B+LNZ.
The report highlights that over the past three years, sheep and beef farmers have seen a 32 percent rise in input prices from 2021-22 to 2023-24. Even though the inflation rate has decelerated, input costs have continued to rise, albeit at a slower pace. Key areas such as interest, insurance, and animal health have seen substantial cost increases.
Interest rates, which have surged by 12 percent, have been a major driver of on-farm inflation, contributing half of the overall 2.8 percent inflation rate. High borrowing costs are particularly challenging for farming businesses, impacting cash flow and profitability. Additionally, insurance costs have risen by 8.7 percent, and animal health expenses have increased by 8.0 percent, further squeezing farm budgets.
One area where farmers have found some relief is in the cost of fertiliser, lime, and seeds, which decreased by 4.2 percent. However, these reductions are not enough to offset the overall financial pressures faced by farmers.
Acland emphasises the broader impact of these financial challenges.
"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."
B+LNZ forecasts that sheep and beef incomes will be 54 percent lower this year, predicting that most farmers will not turn a profit. Increased costs, combined with softer prices for sheepmeat, are key factors driving this decline in profitability.
Although on-farm inflation is lower than the consumer price inflation of 4.0 percent between March 2023 and March 2024, the high costs of essential farm inputs underscore the ongoing challenges for sheep and beef farmers.
"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.
