Feed and grazing costs rose nearly 15 percent in the 2022-23 year, the report found, Photo: RNZ / Nate McKinnon
Farmers are dealing with the highest level of on-farm inflation in 40 years, a new report has found.
Beef + Lamb New Zealand's report Sheep and Beef On-farm Inflation 2022-23 showed on-farm inflation sitting at 16.3 percent, two-and-a -alf times the consumer price inflation rate of 6.7 percent.
The driving factor is farmers paying higher interest on debt, which comprises 10.9 percent of total farm expenditure.
Floating interest rates doubled from March 2022 to March 2023 while fixed and overdraft interest rates increased by around 50 percent, the report found.
Feed and grazing costs, which are up nearly 15 percent and fertiliser, lime and seeds which have increased by 14 percent, were the next two largest increases for the year.
Beef + Lamb chief economist Andrew Burtt said everyone thought last year was bad, but this is the highest on-farm inflation rate for sheep and beef farmers since 1981-82, when it was at 17.1 percent.
"With inflation eroding farm profitability, farmers continue to tighten their belts, debt servicing is a non-negotiable, which means farmers are looking to cut back in other areas of farm expenditure.
Source: Beef + Lamb New Zealand Economic Service / Statistics New Zealand Photo: Beef + Lamb New Zealand
"This will have a flow-on effect to our rural communities as services and farm inputs are reduced. With uncertainty over regulations and the economic outlook for New Zealand there is a focus on essential 'must have' expenditure on farm."
Beef + Lamb chief executive Sam McIvor said the financial pressure was challenging.
"A generation of farmers have not operated under this level of inflation and the situation is further exacerbated by unworkable environmental rules.
"When farmers are impacted in this way, it has a knock-on effect to the wider economy including businesses that service farms like vets, trucking companies, shearers and many more. It also impacts businesses where farmers spend their family incomes."
McIvor said the latest inflation figures were another reason the government must put the brakes on its raft of environment policy changes.