A ‘cost-of-farming crisis’ has farmers squeezed between rising costs and falling farm produce prices.
While on-farm spending by local farmers has not dropped noticeably, discretionary spending was likely to be down with a flow-on effect for the local businesses.
Federated Farmers acting president Wayne Langford said farmers across New Zealand faced a cost-of-farming crisis.
Fertiliser was up 28%, fuel by 33%, and interest rates had increased by 45% compared to a year ago.
“We’re also under real pressure with staff costs, rate increases and the impacts of general inflation.”
While costs were increasing, the price farmers received for their produce was heading in the opposite direction, he said.
“Farmers are getting squeezed in the middle and are struggling to turn a profit.”
They are having to tighten their belts and count every penny, Langford said.
Hinds dairy farmer Cole Groves said interest rates had doubled over the last year and his farm operation faced an additional $8000 in interest rates costs.
“We’re not spending any money we don’t need to,” he said.
Rising food prices, expensive fuel and a jump in mortgage and interest rates was hurting people at the moment.
When that happens money doesn’t flow around as much, especially in a small community like Ashburton, he said.
Mid Canterbury farmer David Clark said farmers’ costs had risen exponentially in the past 18 months while the price farmers received had not kept pace.
There was less money available for any spending of a discretionary nature – including repairs and maintenance, research and development and plant replacement, he said.
Clark was also disappointed that multinationals had taken to importing grain from overseas “to crunch the price of New Zealand’s products back down”.
Apart from grain prices, farmers were facing reduced lamb prices and lower dairy prices. This would have a knock-on effect for the local economy in Ashburton, Clark said.
Ashburton-based EuroAgri manager James McCloy said the agricultural machinery supplier had not seen a significant change in spending from farmers despite rising interest and an increase in machinery costs.
“Farmers are still making purchases as necessary,” he said.
Fertiliser and related equipment were selling well because farmers appreciated the benefit of increased yields.
Secondhand machinery sales were also up. However, this was driven by the ongoing supply chain issues.
McCloy said he expected to see those machines back for sale next year when stock came in and farmers could buy new machines.
Ruralco group chief executive Robert Sharkie said farmers were watching interest rates and farm-gate prices and generally being cautious while looking for cost efficiencies for their available cash.
Farmers were still buying the products and services they needed to run their farms. In some cases this meant buying a more expensive product that provided better value overall for the farm, he said.
“Rural towns are heavily geared towards agriculture so they are the first to feel the pain and first to feel the gain with additional discretionary spend.
“The likes of retail and restaurants could be feeling it more than other more ag-centric businesses,” Sharkie said.
- By Sharon Davis