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Statistics Paint a Grim Picture?

Greetings Readers

Statistics New Zealand's Farm Expenses Price Index charts show the steadily rising trend of most farm input prices.

Livestock price increases are understandably a major component of the increase but the figures released today give a strong warning of the exposed future profit position farmers could face.

But even more significant is the rapid relative rise of all inputs particularly fuel to levels far in excess of any period in the past ten years. (http://www.stats.govt.nz)

The concern should centre on the relative positions of the '92-'93 price rises and the current prices paid. The decoupling of farm input prices and export income is an accepted risk in farming. But in this particular period of farm product price lift there is little indication that real prices received from the export marketplace have improved at all and the bubble is totally drive by the exchange rate and paper manipulation.

Therefore when this mini boom passes as the exchange rate rises, farmers will be left with a much higher cost structure - depending how long the mini boom lasts- and much lower incomes. The stats Department Graph demonstrates this cycle and our recollections of diminishing farm profits from 1994 -96 will confirm that there is a difficult end in store at the end of this welcome cycle.

Business strategy would suggest that farm expansion at the peak of this cycle would be folly and the timing of expansion should wait until the mini boom subsides. Keep your money in you pocket, reduce debt according to plan and be alert for opportunity on the change.

Good farming




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