Sheep, beef farmers' business costs rise

The business costs of sheep and beef farmers jumped 3.7 per cent in the year to January.

Rob Davison, economic service director of Meat and Wool Innovation, said last year's lift in sheep and beef "input prices" was the second-highest for the past decade and was more than double the increase of 1.7 per cent recorded the previous year.

Excluding interest charges, the underlying rate of on-farm inflation was 3.4 per cent.

Of the 21 spending categories in the economists' survey, 18 recorded cost increases and three cut costs.

The only significant drop was 2.3 per cent in the price of applied fertiliser.

The biggest price rise farmers had to absorb was for seeds, which jumped 27.1 per cent in the 12 months to January, partly because a poor harvest last autumn reduced supply and pushed up prices.

Mr Davison said the grass seed harvest this season had been excellent in Canterbury and prices were expected to drop back to normal.

Interest costs climbed 5.3 per cent during the decade, and because servicing debt is one of the largest costs on sheep and beef farms, interest made the largest contribution (0.65 percentage points) to the on-farm inflation rate.

Floating interest rates rose during the year, offset only partly by lower fixed-interest rates.

Despite the New Zealand dollar appreciating throughout last year and making imports cheaper, petrol and diesel costs were driven up 14.8 per cent in 2002-03 by increases in the price of crude oil.

Fuel prices have risen 34.2 per cent in the last five years.

Accident insurance (ACC) recorded the second-largest percentage increase of 16.9 per cent in 2002-03, and general insurance premiums rose 9.2 per cent.

Other significant cost increases were for electricity (11.2 per cent), cartage (8.1 per cent), administration (5.1 per cent), cultivation and sowing, rates and wages (each 4.5 per cent).

Since January, Government Statistician Brian Pink has released separate figures showing that farmers' business expenses did not increase in the quarter to last December, and only 0.5 per cent in the September quarter.

- NZPA