Running a farm in New Zealand has become significantly more expensive, and there’s growing evidence that these higher costs are not just a short-term spike, but a permanent shift in the business of farming.
New research from ANZ Bank New Zealand shows farm operating costs are now around 27 percent higher than they were before COVID. The findings, based on data from more than 4,000 farms across dairy, red meat, kiwifruit, arable and pipfruit sectors, highlight a clear message: lifting productivity is no longer optional—it’s essential.
A new cost reality
For most farmers, rising expenses in labour, fertiliser and other key inputs have become the “new normal.” Even as inflation begins to ease, these costs are unlikely to fall back to previous levels.
That means standing still financially now requires producing more from the same resources. It’s a shift that mirrors challenges faced by many business owners beyond the farm gate—higher input costs with constant pressure on margins.
The widening performance gap
One of the most striking insights is the growing gap between average farms and top performers. The difference isn’t about scale, but how effectively a farm is run.
Top-performing farms are consistently generating stronger returns per hectare, not by expanding, but by fine-tuning their systems. Small, well-executed improvements—whether in pasture management, animal performance or crop yields—are compounding over time.
For business owners, the lesson is clear: efficiency and optimisation often deliver better returns than simply getting bigger.
Sector differences tell a story
Not all sectors have experienced cost pressures equally. Dairy and kiwifruit operations have seen some of the biggest increases, largely due to their reliance on labour and exposure to wage growth.
However, these sectors have also shown what’s possible when productivity lifts alongside revenue. Kiwifruit, in particular, has delivered strong income growth, driven by more productive orchards and maturing plantings. Dairy farmers have also improved returns through better herd performance rather than expansion.
In contrast, red meat farmers have faced tighter margins, with rising costs eating into gains. Pipfruit growers have had a tougher run still, dealing with labour shortages and adverse weather impacting production.
Investment beats cost-cutting
A key takeaway from the research is that cutting costs alone is not enough. The most resilient and profitable farms are those that continue to invest, carefully and consistently, through the ups and downs of the cycle.
This might mean upgrading systems, improving infrastructure, or adopting new technology, but always with a clear focus on long-term productivity gains.
Navigating uncertainty
Global uncertainty, from geopolitical tensions to fuel and input volatility, adds another layer of complexity for farmers and business owners alike. While these factors are largely outside anyone’s control, strong fundamentals can make a critical difference.
Farm businesses that understand their cost structures, maintain cash flow, and plan ahead are far better positioned to absorb shocks and seize opportunities.
The bottom line
Farming is now a higher-cost business than it was five years ago, and that reality isn’t likely to reverse. But within that challenge lies opportunity.
Farms and businesses best equipped for the future are not necessarily the biggest, but the ones that focus on doing the basics exceptionally well, making informed decisions and continually improving how they operate.
In today’s environment, productivity isn’t just about growth—it’s about resilience.
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