TL;DR: Beef + Lamb New Zealand’s report shows a 2.8% on-farm inflation rate for 2023–24, down from 16.3% last year. Despite this, high input prices continue to strain farm profitability. Farmers face rising costs in interest, insurance, and animal health, impacting financial stability.
Beef + Lamb New Zealand (B+LNZ) has released its latest Sheep and Beef On-farm Inflation report. The report shows a 2.8% inflation rate for 2023–24, a significant decrease from the previous year’s 16.3% rate.
High Input Prices
Despite the lower inflation rate, farm input prices remain high. This continues to put pressure on farm profitability. “While it is positive that inflation is trending downwards, the reality is that times are tough,” says Kate Acland, Board Chair of B+LNZ. “The cumulative impact of high input prices over recent years is significant.”
Rising Costs
For the past three years, sheep and beef farmers have faced high inflation. Input prices have risen by 32% between 2021-22 and 2023-24. Although inflation has slowed, input prices continue to increase, just at a more modest rate.
Key Areas of Increase
Farmers face substantial cost increases, especially in interest, insurance, and animal health. Interest rates are a main driver behind on-farm inflation. A 12% increase in interest costs contributed half of the overall 2.8% inflation rate in the last year. High interest costs have been particularly difficult for farmers, affecting their cash flow and profitability.
Insurance and Animal Health Costs
Insurance costs rose by 8.7%, while animal health expenses increased by 8.0%, 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%.
Impact on Profitability
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 financial pressure,” says Acland. “The knock-on effect on rural communities and regional towns is huge.”
Income Forecast
B+LNZ forecasts that sheep and beef incomes will be 54% lower this year. Most farmers are not expected to make a profit. Increased costs and softer prices for sheepmeat are key drivers of this fall in profitability.
Consumer Price Inflation
On-farm inflation was lower than consumer price inflation, which was 4.0% between March 2023 and March 2024. However, the ongoing high costs of essential farm inputs highlight the challenges faced by sheep and beef farmers.
Detailed Analysis
B+LNZ’s report provides a detailed analysis of changes in farm input prices and their impact on farm expenditure. It offers valuable insights for farmers navigating these economic pressures. “Farmers are still feeling the squeeze from high interest rates and other essential expenses,” adds Acland. “Our focus remains on supporting farmers through these tough economic conditions and advocating for measures that can help alleviate some of these financial pressures.”
