Sheep and beef farm input prices rose moderately in the year to March 2018 with on-farm inflation at two 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.
B+LNZ Economic Service chief economist Andrew Burtt says an increase of 0.3 percent across the three largest expenditure categories: interest; repairs, maintenance and vehicles; and fertiliser, lime and seeds – moderated greater price increases of smaller categories.
“Of the 16 input categories, prices were up to some degree in all categories except for fertiliser, lime and seeds – the largest category of expenditure – which was down 0.6 percent.”
The most significant price increases were for fuel (+12 percent); insurance (+6.7 percent); and electricity (+5.8 percent), however, on average these input categories only account for 5.7 percent of total farm expenditure. The large increase in the fuel price followed a 19 percent increase in 2016-2017, but this was after considerable decreases in 2014-2015 ( 22 percent) and 2015-2016 ( 13 percent).
“Excluding interest, on-farm inflation was 2.2 percent – the second year of increasing input prices after four years of relatively little change previously”, Burtt says.
“It highlights the significance of current low and relatively stable interest rates because interest expenditure accounts for 14 percent of total farm expenditure, which makes it the second largest category of expenditure.”
In contrast, consumer price inflation, which is measured by the consumer price index (CPI) that measures the rate of change in the price of goods and services purchased by New Zealand households, was up 1.1 percent in the year to March 2018. Over the last decade, the CPI has increased by 7.1 percentage points more than on-farm inflation.
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.