A survey by specialist dairy farm and business
management company, Farmright reveals dairy farm working
costs have risen 10% a ha while Meat and Wool New Zealand
also reports a 9.7% increase in on-farm costs.
The 9.7% increase for sheep and beef farms to the end of
March was the highest since 1986-87 when prices rose 13.2%,
and compared with just 2.7% for the previous 12-month period.
Meat and Wool report fertiliser, lime and seed combined
increased 30% in the past year, fuel 23.5% and feed and
grazing 13.7%.
There is no sign of costs easing.
Since March, superphosphate had increased a further 85%, from
$260 a tonne to $480 a tonne, Meat and Wool reported.
Farmright manager Jim Lee said he surveyed 50 farms the
company manages and found that between 2006-07 and 2007-08,
feed rose 25%, fertiliser 24% and freight and cartage 37% per
hectare.
Mr Lee said fertiliser costs had continued to soar since the
survey was done, but higher wage costs were also creeping up
on dairy farmers.
Wage costs only rose 3% last year, but newly negotiated
contracts indicated that figure would increase sharply this
year because of greater demand and a shortage of workers.
"We know from contracts being negotiated for new and existing
staff being rolled over that there have been some increases."
The cost of production, which included feed, run-off costs
and cost of management, but excluded depreciation on the
Farmright-managed farms, rose from $2.91 per kg of milk
solids (kg m/s) in 2006-07 to $3.61 per kg m/s in 2007-08.
Mr Lee said drought and cost increases had an impact.
But he said some businesses were now operating at higher cost
structures than they would be aware of.
He believed some farmers would be faced with costs of $6 per
kg, made up of $4 per kg farm input costs and interest costs
of $2 per kg.
"Cost control and financial discipline are more important now
than ever before," he said.
Drought has also compounded costs on sheep and beef farms.
Meat and Wool's executive director Rob Davison said the dry
summer and autumn had put pressure on feed and grazing costs
while interest rate rises increased debt servicing 9% and
electricity rose 7.2%.
In a move that will fuel debate on setting rates based on the
capital value of land and improvements, local authority taxes
rose 6.6%, the second-highest increase in 17 years, and takes
rate increases to 33% in the past five years.
