Farming costs for sheep and beef operators fell by 3.5% in the year to March, compared with a 7.8% lift in the previous 12 months."The 3.5% decrease in on-farm inflation was driven by a significant drop in the price of fertiliser, plus the impact of
Farming costs for sheep and beef operators fell by 3.5% in the year to March, compared with a 7.8% lift in the previous 12 months.
"The 3.5% decrease in on-farm inflation was driven by a significant drop in the price of fertiliser, plus the impact of lower interest rates," Meat & Wool New Zealand's Economic Service said today.
"Compared with 12 months earlier, the on-ground price of fertiliser fell 16.1%, while the rate of change in interest rates fell 11.8%." In the previous 12 months, the price of fertiliser rose 33.8%.
This drop in on-farm input prices offered sheep and beef farmers some relief after two years of significantly increasing costs, said the agricultural economists, who are part of the meat industry board.
The Economic Service today released its "movements in sheep and beef farm input prices index" which measures on-farm inflation.
The index is different to total farm expenditure, which also takes into account the volume of inputs used on farms. Fertiliser makes up about a sixth of farm costs.
Economic Service executive director Rob Davison noted that when calculated over a five-year period, on-farm inflation increased 22.5%, while the consumer price index rose only 15.1%.
"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 said.
But the decline in the price of fertiliser over the past year reflected lower international prices, with fertiliser largely imported or manufactured using imported phosphate 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 drop in fertiliser costs followed steep increases over two previous years, up 33.8% in 2008-09 and 30% in 2007-08.
Fuel accounted for the largest price increase during the 12 months to March 2010 – up 9.6% – while local government rates increased 6.2%. Feed and grazing prices rose 5.7%.
The Ministry of Agriculture and Forestry (MAF) is expected to tomorrow release the projections from its own economists for agricultural earnings across all sectors for the next five years.
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