Farmers warned feed costs expected to rise

Baled winter feed near the Hawkdun Range is evidence of last year's wet spring, which led to tremendous growth in Central Otago. Photo / Stephen Jaquiery

Farmers have seen an easing in fuel and feed costs in recent months, but a caution has been sounded on feed costs in the year ahead, starting with the dairy sector.

ASB senior rural economist Nathan Penny said while annual inflation had fallen, feed cost inflation, in particular, may fire up again for the rural sector.

"Falling feed price inflation drove much of the overall decline in farm input inflation," he said in a statement.

Annual feed price inflation slowed to 3.7 per cent in the year to March, from the 6.6 per cent annual rise in calendar 2018.

Fuel prices also slowed their march higher over the past year, now being 3.5 per cent higher than a year ago, but having jumped as much as 26 per cent at one stage in 2018, Mr Penny said.

However, looking at the year ahead, Mr Penny expected farm input price inflation to "reignite".

"We anticipate that rising dairy prices will lift the demand for feed, and thus lead feed prices higher," he said.

ASB had forecast the 2019-20 milk price to rise to $7 per kilogram of milk solids.

Potentially offsetting a rise in feed prices, Mr Penny said a key exception was likely to be wages.

"Wage pressures are likely to remain modest this year, but at the same time finding good farm workers will remain a challenge for the sector," he said.