Rising fuel costs are starting to bite deep into dairy farmer earnings and are expected to result in more expensive dairy products on supermarket shelves.
Farmers are struggling to cover costs, with Fonterra’s increased $7.25 midpoint for its milk price forecast still below Dairy NZ’s expected $7.65 break even point.
Farm costs are continuing to rise, but the eye-watering fuel price is starting to hurt, with diesel bills running to tens of thousands of dollars over a year.
Federated Farmers Dairy vice-chairman Karl Dean said the diesel price was heading in the wrong direction.
"I just wish the fuel prices would come down. I think there were forecasts that fuel prices were hopefully going to come down this year, but that seems to have been quashed pretty quickly. At the moment the average tractor is probably costing about $500 to fill up and by Christmas, if what the media are saying is right, that could be close to $700."
Depending on the job on hand a tractor tank might be emptied after 10 to 12 hours work.
As a North Canterbury sharemilker and leaseholder of land, Mr Dean’s own yearly fuel bill is $40,000. "Two years ago that was $20,000 and that’s running two or three tractors. You imagine the impact that’s having on the contract industry and the trucking industry.
"I was just talking to a driver who was dropping off some grain for the calves this morning and he said it cost him $800 to fill up every day for their trucking operation and three years ago it was $500. That drips down to the farmers and it drips down to the food that’s on the shelves in the supermarket."