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As global markets grapple with renewed inflationary pressures, geopolitical instability and the prospect of higher interest rates, New Zealand farmers are better positioned than many international competitors to navigate the challenges ahead.
According to economist Cameron Bagrie and Findex Agribusiness leader Hayden Dillon, many farming businesses are well placed despite increasing pressure on costs. The sector benefits from relatively low-cost, grass-based production systems, improving commodity prices and stronger balance sheets. Farmers also have growing access to technology, professional advice and risk management tools.
Dillon says several years of improving returns across key agricultural sectors have enabled many farmers to reinvest in their businesses, strengthening productivity and resilience ahead of the next economic cycle.
Costs are rising, and there is every likelihood more pressure is still to come from inflation and interest rates. However, many farmers have used the stronger earnings environment of recent years to reduce debt, improve infrastructure, adopt new technology, and invest in productivity gains that will help them manage those pressures.
Compared to many overseas producers, New Zealand’s grass-based farming systems remain a significant competitive advantage. Being less reliant on imported feed, energy and other high-cost inputs, provides a degree of protection when inflation and global volatility increase.
While New Zealand farmers continue to benefit from strong fundamentals, Bagrie says inflation remains a key watchpoint globally.
Interest rates are under review by central banks, but the key central bank to watch is the US Federal Reserve. It’s been obvious that the United States has hotter inflation than what they’d like, and they are seeing strong labour market reports.
Core inflation, which removes fuel and food, has remained stubbornly around 3%, while central banks have struggled to return inflation to their 2% targets. It all points to interest rates needing to move up, or being too low.
He notes that inflationary pressures, ongoing geopolitical tensions and higher energy costs all point towards a more volatile operating environment for businesses around the world.
While it’s easy to fixate on the local situation, but the bigger picture is what’s happening with US interest rates which impacts the big dollar: the US dollar. Where it goes, the NZD/USD moves in the opposite direction, and what affects the US ends up affecting us.
Despite the uncertainty, both Bagrie and Dillon believe New Zealand agriculture remains in a relatively strong position. Speaking at Fieldays, Dillon said many rural communities are outperforming other parts of the economy.
We’re seeing what is almost a two-speed economy. Consumer spending in Auckland and Wellington remains somewhat depressed, yet many rural economies are performing strongly, and for some parts of the South Island, conditions have rarely been better.
Farmers have largely adapted to the reality of higher operating costs.
Whether it’s fuel, labour, compliance or capital, costs are higher than they were five years ago and businesses are increasingly planning around that reality. The successful businesses aren’t waiting for costs to come back down, they’re focusing on how to become more productive and efficient.
While global events remain outside farmers’ control, Bagrie says business fundamentals remain as important as ever.
You can’t control what’s going on globally, but what you can control is your own business. Focus on the things in front of your eyes. Watch the business basics, keep maximising productivity and minimising costs, look after your staff and yourself. It’s these little things that turn a good business into a great business and go straight to the bottom line.
Periods of uncertainty also increase the value of experienced advice. Advisory makes a difference in every business. Whether it’s commodity price hedging, capital structure, cashflow planning or strategic decision making, having experienced people around you becomes more valuable when uncertainty increases.
Dillon says technology is becoming an increasingly important part of maintaining profitability and competitiveness across the agricultural sector.
The farmers who will perform best over the next decade won’t necessarily be those with the biggest farms, but those who make the best decisions. Good advice, technology, AI, and risk management (such as commodity hedging, forecasting and strong financial management) all help businesses make better decisions and protect profitability.
AI and emerging technologies should be viewed as practical business tools rather than future concepts. Farmers might think they’re avoiding AI, but this won’t be possible for long. We’re already seeing technology helping businesses save time, improve decision making and operate more efficiently. Like any investment, if it improves productivity and strengthens your business, it’s worth considering.
While global uncertainty is unlikely to disappear anytime soon, New Zealand farmers remain well positioned to compete and prosper.
The cost pressures are real, but so are the opportunities. New Zealand agriculture has proven time and again that it can adapt, innovate and compete on the global stage. Businesses that continue to invest in productivity, embrace useful technology and make use of good advice will be well placed for whatever comes next.
As inflation, interest rates and geopolitical uncertainty continue to shape global markets, New Zealand agriculture enters the next phase from a position of relative strength. With resilient production systems, improving financial performance and increasing adoption of technology and advisory support, many farming businesses are well equipped to navigate the challenges, and opportunities ahead.
Disclaimer
Findex NZ Limited trading as Findex.
The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex.
June 2026
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