Farmer Focus: The inflation bear has awoken

It seems the global inflation bear has awoken and is coming out of the cave angry. Down here in New Zealand, we are no different.

Both sides of the ledger are benefiting at the moment, but we need to ensure the balance remains.

Dairy prices are at all-time highs and futures markets point to further gains. Thanks to farmer-owned co-op Fonterra, the best of world market value makes its way right back onto farm.

See also: Farmer Focus: Faithful plough and power harrow strike again

About the author

David Clark
Farmer Focus writer
David Clark runs a 463ha fully irrigated mixed farm with his wife Jayne at Valetta, on the Canterbury Plains of New Zealand’s south island. He grows 400ha of cereals, pulses, forage and vegetable seed crops, runs 1,000 Romney breeding ewes and finishes 8,000 lambs annually.
Read more articles by David Clark

Lamb and beef markets are also at historical highs, as are horticultural products, but growers are constricted in their harvest ability due to a lack of itinerant staff.

The wool market remains stuffed, and no less than a miracle is required.

For our arable crops, we are seeing very high pricing for “commons” grass and clover crops, which will put real pressure on the proprietary varieties this autumn as they have not moved in value in a decade.

We don’t forward-contract our grain, so we have captured value out of a very tight feed market and avoided the lag seen by those who forward-sold at much lower values.

The trick, however, is going to be to maintain our income levels, because input cost inflation is rampant, and supply is difficult.It is hard to haggle a discount on something when it is the last one on the shelf and the bloke behind you is waiting to buy it.

We tried to beat fertiliser price rises by carting back to our shed in advance and have pre-ordered agrochemicals where possible.

However, these are only short-term fixes and, ultimately, we can’t beat the price rises.

Interest rates are rising, and that will very quickly put pressure on our highly indebted property sector.

It is all becoming very reminiscent of 2008, and things didn’t go too well for a while after that, but arguably we haven’t learned the lessons that the global financial crisis should have taught us.

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