Sheep and beef on-farm inflation reaches three percent

Andrew Burtt
Andrew Burtt, B+LNZ chief economist.

Sheep and beef farm input prices rose twice as fast as consumer price inflation in the year to March 2019 with on-farm inflation at three 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’s chief economist Andrew Burtt says the biggest three expenditure categories – shearing expenses; fertiliser, lime, and seeds; and council rates – contributed substantially to the three percent rate of on-farm inflation.

“Of the 16 input categories, prices were up to some degree in all categories except for weed and pest control – which was down 0.2 percent,” says Burtt.

The most significant price increases were for shearing expenses (+11.2 percent); fertiliser, lime, and seeds (+6.2 percent); and rates (+5.1 percent). On average, these input categories account for a quarter of farm expenditure and were responsible for nearly 60 percent of the overall on-farm inflation.

Shearing expenses have also been the biggest increasing expenditure over the last 14 years following the increase in pay rates for shearing contractors by 25 percent.

“Excluding interest, on-farm inflation was 3.5 percent – the highest rate since the 2011-12 season,” says Burtt.

“Low interest rates continue to be important because interest expenditure accounts for 14 percent of total farm expenditure, which makes it the second largest category of sheep and beef farm expenditure.”

In contrast, consumer price inflation, which is measured by the consumer price index (CPI), was up 1.5 percent in the year to March 2019. Over the last decade, the CPI has increased 6.8 percentage points more than on-farm inflation.

The full report is available on the B+LNZ website:

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