A Decrease In On-Farm Input Prices Offers Beef Farmers Relief

NEW ZEALAND - After two years of significantly increasing costs, New Zealand beef farmers experienced a 3.5 per cent decrease in input prices for the year ended March 2010.
calendar icon 15 June 2010
clock icon 2 minute read

Meat & Wool New Zealand’s Economic Service today released its Movements in Sheep and Beef Farm Input Prices 2009-10 report. The report shows the 3.5 per cent decrease in on-farm inflation was driven by a significant drop in the price of fertiliser, plus the impact of lower interest rates. Compared with 12 months earlier, the on-ground price of fertiliser fell 16.1 per cent, while the rate of change in interest rates fell 11.8 per cent.

Economic Service Executive Director, Rob Davison said, calculated over a five-year period, on-farm inflation increased 22.5 per cent, while the Consumer Price Index rose only 15.1 per cent over the same period.

“The stronger rate of increase for sheep and beef farmers over the past five years reflects the increase in fertiliser, fuel and energy prices over that time,” Mr Davison says.

However, the recent decline in the price of fertiliser reflects lower international prices, with fertiliser largely imported or manufactured using imported rock. New Zealand’s stronger exchange rate than for the previous 12 months meant fertiliser prices provided one of the few exchange rate benefits to the farm sector.

“The decline does follow steep increases in fertiliser costs for two successive years – up 33.8 per cent in 2008-09 and 30 per cent in 2007-08.”

Fuel accounted for the largest price increase during the 12 months to March 2010 – up 9.6 per cent – while local government rates increased 6.2 per cent. Feed and grazing prices rose 5.7 per cent.

“While fertiliser and fuel prices are generally up for all producers internationally, of greater concern are the domestic price increases that are internal to New Zealand. For instance, local authority rates rose 6.2 per cent in the 12 months ended March 2010, and 35.8 per cent over the past five years, an average of 7.1 per cent annually.”

The Movements in Sheep and Beef Farm Input Prices index is compiled by Meat & Wool New Zealand’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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