Sheep And Beef Farm Profits Predicted to Drop

7 MARCH 2013
FOR IMMEDIATE RELEASE

Sheep And Beef Farm Profits Predicted to Drop

Sheep and beef farm profits are predicted to halve this season, as the full impact of current lamb prices and drought kick in.

Beef + Lamb New Zealand’s Economic Service Mid-Season Update estimates that farm profit before tax for the 2012-13 season will fall 54 per cent on last season, to an average of $73,000 across New Zealand. This is largely due to sharply lower lamb prices and a consequent 27 per cent decrease in sheep revenue.

B+LNZ Economic Service Executive Rob Davison says lamb numbers themselves were up, thanks to a 123 per cent lambing last spring and more hoggets producing lambs. However, this was not sufficient to offset the lower lamb price and impact of drought.

“The forecast average lamb price of $85 per head is down 25 per cent from last season’s $113.60, which was the second highest on record. This has, understandably, flowed through to farmers’ bottom lines, with the result that profit levels will effectively halve for the season ending 30 September 2013. In inflation-adjusted terms, this returns profits to levels similar to the first decade of this century.”

Mr Davison says maintaining prices for lamb will be challenging. “Europe’s debt crisis is far from being solved and there is almost no growth in the region. Meanwhile, there are concerns about economic prospects for the US, given its fiscal challenges. And China’s economic growth has slowed to the lowest rate in a decade, although it is still at about 8 per cent.”

Cattle returns are predicted to drop 8.8 per cent, but Mr Davison says the outlook is relatively positive, thanks to the supply situation in the US.

“Three years of drought in the US has reduced the country’s total cattle numbers to 89.3m head – the lowest tally since 1952. Significantly, the beef cow herd is the smallest it has been in decades and it will take years to rebuild breeding numbers.”

The average gross revenue is estimated to be $409,300 – down 19 per cent from last season. Total farm expenditure is estimated to fall only 3.6 per cent, to $336,300.

The full report is on the B+LNZ website at: www.beeflambnz.com/economic-reports/

About Beef + Lamb New Zealand:
Beef + Lamb New Zealand Ltd is the farmer owned industry organisation representing New Zealand’s sheep and beef farmers. Beef + Lamb New Zealand Ltd invests farmer levies to help develop a growing sheep and beef industry providing sustainable returns for future generations. Beef + Lamb New Zealand has four programmes – Farm, Market, People and Information – to deliver innovative tools and services to support informed decision making, and continuous improvement in market access, product positioning and farming systems for New Zealand’s sheep and beef sector.

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