Iran conflict drives up costs across NZ farming

Summarised by Centrist

New Zealand’s farming sector is being warned to brace for a fresh wave of cost pressure as the war involving Iran pushes up fuel, freight and fertiliser prices. 

Silver Fern Farms chief executive Dan Boulton said the company expects the conflict to add at least $35 million in extra costs over the next six months, calling that estimate a minimum as conditions in the Persian Gulf keep shifting. 

He warned that farmers would likely be seeing it “back on farm as well”, meaning in their own day-to-day operations through higher costs and tighter supply. 

Rabobank senior protein analyst Jen Corkran said the fallout so far is showing up in “high costs and squeezed margins rather than changes in global demand for food”. 

She said diesel and fertiliser prices are rising sharply, with urea up more than 50% in a month. She warned those increases would eventually feed through to consumers. Even if the conflict ends soon, she said there would still be a lag before input prices came back down.

There are some buffers for now. Lamb prices remain 40% above the five-year average and beef prices are 60% higher, which is helping offset some of the pressure. Fonterra also said alternative shipping options and hedging policies should reduce the immediate hit, though it acknowledged disrupted shipping schedules, rising freight costs and the risk of higher inventory and costs in the second half of the year.

Economist Cameron Bagrie said Silver Fern Farms’ projected hit amounts to about 1.7% of its $2 billion turnover, which puts the number in perspective. 

Even so, he warned the broader inflation threat is real, forecasting New Zealand inflation could rise to 4.5% later this year, driven largely by fossil fuel prices. 

He said global food inflation is already beginning to pick up and warned it was “a forewarning that something is coming across the broader food complex”. Bagrie also said that if fuel rationing becomes necessary, farming and heavy transport should be first in line because of their importance to the wider economy.

Read more over at Farmers Weekly

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