On-farm inflation 9.7%

July 15, 2008

A 9.7% increase in costs for sheep and beef farmers in the year to March 2008 is the highest rate of on-farm inflation since 1986-87 when input prices rose 13.2%.

The previous year the price of inputs increased 2.7%.

Major increases were:

Fertiliser, lime & seeds:         30%

Fuel:                                      23.5%

Feed & grazing:                     13.7%

Interest:                                 9.0%

Electricity                               7.2%

Local Govt. rates                    6.6%

Although the high dollar reduced the price of imported goods, fertilsier, lime and seed prices still increased by 30%. The price of fertiliser increased from $260 to $480, another 60%, between March and June, June but that is not included in these figures.  

Local Government rates increased 6.6 per cent. This was the second largest increase in 17 years and in the last five years the overall increase was 33 per cent, an average of 6.6 per cent per year. The overall cumulative increase over 5 years to March 2008 was 22.7 per cent, while over 10 years the increase was 37.0 per cent.

In comparison the CPI rate of increase over 5 years was 14.0 per cent, well below the 22.7 per cent for sheep and beef farm input prices

If interest is excluded, the underlying rate of on-farm inflation in 2007-08 was up 8.3 per cent.

Meat & Wool Economic Service figures for the annual on farm inflation percentage change in the past 10 years:

including interest        (underlying % change) excluding interest

1998 -99         -2.0%                                          0.9%

1999-00                 2.8                                                             1.4

2000-01                 5.2                                                             6.0

2001-02                 1.7                                                             2.8

2002-03                 3.6                                                             3.4

2003-04                -0.2                                                             0.0

2004-05                 4.1                                                             3.7

2005-06                 4.8                                                             5.2

2006-07                 2.7                                                             2.7

2007-08                 9.7                                                             9.8

 


There’s Still Gold in Grass

June 17, 2008

The price of farms sold doesn’t reflect the supposedly weakening economy with record median price for dairy farms at $4m last month.

 

The dairy boom is having a flow on effect to other prices with the national median for all farm prices at $1.8m, up by more than 50% on May last year.

 

Real estate agents at the fieldays told me they had no problem selling farms, but there were more buyers than sellers so they’re having problems finding farms to sell.

 

However, 72 Otago farms sold in May, up from 66 the previous month and 39 in May last year. Of those farms 31 were finishing and 28 grazing, which are sought after by dairy farmers. Five were special, five dairy and one each arable, forestry and horticulture.

 

In Southland, 108 farms sold in May, up from 103 in April and 96 in May 2007.

 

The median Otago farm price was just above the national median but eased to $1.87 million in May, from $1.96 million in April, but still up on the $1.16 million in May 2007.

In Southland the median price rose to $2.41 million in May, up from $2.37 million in April and $1.30 million in May 2007.

 

REINZ rural spokesman Peter McDonald said while fuel price rises will hit farming hard that’s not yet reflected in property sales.

 

Mr McDonald said the main drivers for the rural strength were city investors wanting to get into farming, and dairying in particular, as well as farmers wanting to extend their landholdings and amalgamate properties where possible.

 

“It is clear that farmers are taking the view that now is as good a time as any to amalgamate properties to achieve better economies of scale.”


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