How are these uneasy economy times affecting farming?

Andrew Stewart is a fourth-generation sheep and beef farmer in the Rangitikei region.

OPINION: Every New Zealander is feeling the pinch now with increased costs for all households. Mortgage rates, fuel prices, groceries and mobile phone/broadband bills have all risen over the past 12 months.

One of the sectors really facing the squeeze is farming.

Whilst the annual consumer price inflation for New Zealand is at a high of 6.7%, a recent report from Beef and Lamb New Zealand showed on-farm inflation is at an eye-watering 16.3% to March 2023.

To give that number some context, it is the highest it has been since the early 1980s when inflationary pressure forced some farmers to walk away from their properties.

The drivers behind this massive increase are the key costs for many farming businesses.

Floating interest costs have doubled as banks have struggled to keep up with the climb in the official cash rate. So, in practical terms, for a farm carrying $1 million in debt, the cost of servicing that debt has increased from about $30,000 per annum to $60,000 in just 12 months.

Feed and grazing costs have increased nearly 15% over the same period as fuel and growing costs have gone up. Fertiliser costs, which farmers rely on to grow grass, have also risen by nearly 15%.

Other key inputs such as wages, animal health, fuel, electricity, insurance, rates, materials and cartage have all seen significant increases over the same period.

But the staggering increase in costs only tells one side of the story. On the income side of the ledger, there is some serious downwards pressure on the prices farmers receive for their key products.

Much has been touted about the woeful price of wool and shearing sheep is still a significant cost for strong wool farmers. This will be one of the strongest contributing factors to the national sheep flock dipping under 26 million for the first time since records began in the 1850s. And farmers have also had to stomach a 25% increase in shearing costs earlier this year as shearing contractors struggle to keep staff and ward off their own inflationary pressures.

Also, over the past year, the price of lamb paid to farmers has decreased by about 25%, admittedly from historically high levels. For most, this represents a massive hit to farm income. Put simply, this would be equivalent to waking up one day and being told when you arrived at work that you were going to be paid $75,000 as your salary instead of $100,000 for doing exactly the same job.

As a Kiwi sheep and beef farmer, I share a lot of common ground with every other business in New Zealand. Sure, we may produce meat and fibre for a living but we are just a type of small business, of which there are thousands. So, the financial pressures that are choking farms across the country are just as relevant for every other business owner.

And how do we cope with this financial pressure? As previous generations have taught us, tough times are part of the cyclical nature of doing business in any industry in any country. Farmers, like all small business owners, will be battening down the hatches to try and weather the financial storm until conditions improve. At the same time, we will be looking at ways to improve efficiencies, reduce costs and streamline operations in order to survive.

I, like many of my farming colleagues, believe in the natural, nutritional and sustainable characteristics of the products I produce and will continue to take pride in producing them. And for those other small businesses who might find themselves struggling, us farmers also feel your pain. We will continue to support you as long as we are able, as we recognise your value not only to ourselves, but to the country. Difficult times may create difficult situations, but they also build character, fortitude and resilience.

And those are things us farmers know all about.

Andrew Stewart is a fourth generation sheep and beef farmer in the Rangitikei region. He and wife Kylie also run Rangitikei Farmstay and The Mudder as successful diversifications on the family farm. He writes regular columns for Stuff to showcase the life of a modern day farmer in New Zealand.