Farms feel squeeze from costs: survey

Jim Lee
Jim Lee
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.


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