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Record Beef Returns Offset Impact of Dry Season

20 March 2015

NEW ZEALAND - Drought and the ratio of sheep to cattle farmed are the two factors with the biggest impact on sheep and beef farmers’ incomes this season.

Beef + Lamb New Zealand (B+LNZ) today released its mid-season update. Six months ago, the organisation’s new season outlook predicted the average farm profit before tax would be around NZ$110,800 for 2014-15.

However, B+LNZ Economic Service Chief Economist Andrew Burtt said those predictions were based on the assumption that climatic conditions would be normal – and this season has proved to be far from normal in many areas.

“While the average farm profit before tax has been adjusted slightly downwards, to NZ$109,400, North Island profits are expected to increase 19 per cent, to NZ$117,100, while South Island profits are predicted to decrease 20 per cent, to NZ$100,200. The difference can be accounted for by the ratio of sheep to cattle farmed in each island, with cattle making up greater numbers in the north.

“Farm-gate prices for cattle are expected to reach record highs this season, on the back of strong demand and tight supplies, particularly in the US. We are also experiencing the upside of a weaker New Zealand dollar against the US dollar.”

Mr Burtt said total gross farm revenue nationwide should remain similar to last season, with only a 0.7 per cent increase, to NZ$470,500.

“Sheep revenue – which is the largest contributor to gross farm revenue – drops 3.6 per cent, reflecting a drop in both the lamb price and the number of prime lambs sold. Cattle revenue, however, is up 19 per cent to NZ$119,700. Compared to last season, beef export volumes are predicted to rise by 1.2 per cent – reflecting the low dairy payout and dry conditions increasing the dairy cow cull – but the average export value is expected to jump by a significant 31 per cent.”

In other income streams, dairy grazing revenue is anticipated to increase 8.3 per cent, to NZ$22,100, due to more dairy heifers being grazed on sheep and beef as part of the expansion of the dairy industry and a small increase in the per head grazing fee. Cash cropping revenue is forecast to drop 8.2 per cent, reflecting the dry conditions and subsequent reduction in yields.

Mr Burtt said total farm expenditure is estimated to be up 1.2 per cent on last season, to $361,100.

“This is primarily due to increases in interest, and repairs and maintenance costs. Interest expenditure is forecast to rise by 2.0 per cent, as a result of both increased term liabilities and the price of borrowing,” he said.

“With expenditure on interest accounting for 14 per cent of total farm expenditure, this relatively small increase does have a significant impact.”

TheMeatSite News Desk

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