Media Release August 7, 2012 1
Efficiency with farm inputs – a recipe for productivity
An increasingly complex and volatile global farm input market is making it imperative for New Zealand farmers to have in
place good purchasing strategies, while focusing on ways to conserve soil nutrients and input use, according to a new
The report, Efficiency with farm inputs – a recipe for productivity, by agribusiness banking specialist Rabobank, says more efficient use of farm inputs – including fertilisers, chemicals
and fuel – will be essential in ensuring profitability, driving productivity growth and improving environmental
sustainability of farm businesses into the future.
Report author, Rabobank senior analyst Michael Harvey says, with farm inputs a vital component of modern production
systems, all farmers in New Zealand are exposed to the dynamics of procuring farm inputs. “In more recent times these
markets have been evolving and becoming more sophisticated, which is altering the business landscape for farmers as end
users,” he says.
Meeting global food demand
Mr Harvey says improved soil nutrient management will be critical to meeting the challenge of feeding the growing global
“To meet the challenge of feeding nine billion people by 2050, agricultural production volumes need to increase by more
than 70 per cent,” he says. “New Zealand will play a large role as a global food producer; however the extent of this
role will be determined by the innovation and productivity improvements that farmers are able to make,” he says.
“New Zealand is well positioned to increase production, but farmers are going to have to manage their farm input
purchasing strategies and usage. The importance of using farm inputs more judiciously is three-fold: improved
productivity, improved profitability and positive environmental outcomes.”
New Zealand market dynamics
New Zealand relies heavily on global markets for its inputs, which not only makes them a price taker in the market, but
creates challenges around seasonality and the long lead times for sourcing products, the report says.
Mr Harvey says that this import reliance means that farmers not only need to understand what drives the prices they
receive for commodities, but also the forces at play in the global input market, as inputs can account for as much as 40
per cent of on-farm working expenses for many enterprises. Media Release August 7, 2012 2
“The international marketplace makes it important for farmers to have advanced sourcing strategies in place, so they can
make informed decisions about when and how to buy their fertiliser, chemicals and fuel”, he says.
The changing global market
Global input prices are expected to remain above long-term averages, underpinned by the elevated base cost of raw
materials. Similarly, oil prices are forecast to remain structurally higher into the medium term, as global demand
remains high, the Rabobank report says.
“With farm input prices set to remain structurally higher, farmers need to focus on ways to manage the efficient use of
fertiliser, chemicals and fuel on-farm,” Mr Harvey says.
“Having nutrient budgets and nutrient management plans in place and precision agriculture technologies to pinpoint
application are just some of the strategies many farmers are adopting to manage their fertiliser use.”
Farmers’ input use is not only being driven by their relative costs and the need to increase productivity, but
increasingly by environmental factors.
Mr Harvey says that while there are currently no substitutes for the main nutrients, farmers can take action on-farm to
minimise fertiliser use.
“By putting a price on carbon, farmers in New Zealand are being encouraged to transition to a low carbon system and
create carbon credits. There are many actions that can be taken to reduce emissions, and the efficient use of nitrogen
fertilisers is one of these”, he says.
Rabobank New Zealand is a part of the international Rabobank Group, the world's leading specialist in food and
agribusiness banking. Rabobank has more than 110 years' experience providing customised banking and finance solutions to
businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 48
countries, servicing the needs of approximately 10 million clients worldwide through a network of more than 1600 offices
and branches. Rabobank New Zealand is one of New Zealand's leading rural lenders and a significant provider of business
and corporate banking and financial services to country's food and agribusiness sector. The bank has 32 branches
throughout New Zealand.