Declines in interest rates offset a sharp rise in fuel prices for sheep and beef farms

Andrew Burtt
Andrew Burtt, B+LNZ chief economist.

Sheep and beef farm input prices dipped slightly in the year to March 2017 as on-farm inflation was ­­‑0.1 percent, 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 said decreased prices for interest on debt and fertiliser, lime and seeds were enough to offset a rise in prices for fuel and repairs, maintenance and vehicle running costs.

“Of the 16 input categories, prices for 11 increased and five went down. The size and weighting of the categories that decreased offset the increases.”

The significant price decreases were for interest (‑7.5 percent); and fertiliser, lime and seeds (‑3.8 percent). The largest price increases were for fuel (+18.8 percent); repairs, maintenance and vehicle running costs (+3.5 percent) and insurance (+2.7 percent). The large increase in the fuel price follows considerable decreases in 2014‑15 (‑21.7 percent) and 2015‑16 (‑12.7 percent).

“Excluding interest, on-farm inflation was 1.1 percent – an increase in input prices after four years of relatively little change. It highlights the significance of interest expenditure in total farm expenditure,” Burtt says.

“After fertiliser, lime and seeds, interest is the second largest category of expenditure on sheep and beef farms, accounting for 14 percent of total farm expenditure.”

In contrast, the consumer price index (CPI), which measures the rate of price change of goods and services purchased by New Zealand households, was up 2.2 percent in the year to March 2017. Over the last decade, the CPI has increased by 1.4 percentage points more than on-farm inflation.

  The full report is available on the B+LNZ website

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