June 8, 2009

New Zealand sheep and beef on-farm inflation was 7.6 per cent in the year to March 2009, according to Meat & Wool New Zealand's Economic Service.

Economic Service Executive Director Rob Davison says this is the second largest rate since 1986-87. Excluding interest, which decreased in price, the underlying rate of on-farm inflation was 10.7 percent, the highest since 1985‑86.

Fertiliser, shearing expenses, and repairs and maintenance experienced the biggest price increases.

Fertiliser, lime and seeds, as a combined category, were up 33.8 percent in the year to March 2009, with fertiliser prices accounting for almost all of the increase.

Davison however said fertiliser prices have decreased 11 percent since March.

The price for a tonne of superphosphate has decreased 8.6 per cent since March and DAP fertiliser has decreased 18.5 percent.

He said shearing expenses were up 14.7 percent due to a shift away from second shearing to full-fleece shearing, which is higher priced with more labour. According to the Shearing Contractors Association, the general shearing rate would be up 3 to 4 percent.

Prices paid for repairs and maintenance increased by 8.9 percent, followed closely by an 8.7 percent increase for insurance and an 8.3 per cent increase for rent.

After showing increases last year, the cost of both fuel and interest on farm debt decreased in the year to March 2009.

Fuel prices decreased 14.2 percent, predominantly because of the fall in global oil prices. The price of interest on farm debt decreased 6.7 percent, reflecting overall lower interest rates indicated by the Reserve Bank official cash rate falling from 8.25 to 3.00 percent in the year to March 2009, Davison said.

In the last five years, local government rates and charges increased by 33.8 percent, an average per year rate of increase of 6.8 percent. However, rates increased 5.6 percent in the year to March 2009, which is the lowest rate of increase since 2004-05.