Rural cost inflation has peaked with input prices across all farm and orchard types – excluding livestock costs – dipping from an annual pace of 15.6% in the September quarter down to 15.3% in the December quarter. That’s not to say the picture isn’t still ugly with an annual 15.3% rural cost inflation more than double the rate of a year ago. And compared with the pre-Covid average of around 1.8% annually. Westpac Senior Agri Economist Nathan Penny says dairy farms experienced the biggest spike in input costs, with prices up over 17% over the period. Sheep and beef farmers and cropping farmers experienced the next biggest lift, with prices lifting around 15%, while for horticulture, prices were up closer to 12% for the year. Debt servicing costs have risen on average by 45% over the past year. Fuel and fertilizer prices are up 28% and 33%, respectively while price growth in these areas has slowed sharply from the 40% to 70% increases that we saw in the year to June.
Nathan Penny expects rural cost inflation to descend relatively rapidly. From the 15.3% reading for December 2022, to around 4% by December 2023 and 2% by December 2024