Nationally, a small cut to the pre-tax earnings of the average farm is expected by Beef + Lamb New Zealand but that allows for bigger falls in Northland, Waikato, Bay of Plenty, Taranaki and Manawatu.
Breeding ewe numbers fell with last season’s big price-driven mutton kill so fewer lambs this season is one reason for the lower earnings.
In contrast, the greater focus on sheep returns points to gains on the east coast of the North Island and in Marlborough and Canterbury, supported by cash cropping, and Otago and Southland after the drought last summer.
In its New Season Outlook B+LNZ forecast continuing strong export returns for beef and sheep with combined revenues of about $6.5 billion for the October to September export season.
The accompanying forecasts of farm earnings cover the financial year to June 30. Higher input costs are a factor.
Figures are provided across a range of foreign exchange levels and the authors settle on an average mid-rate of US$0.67 for their main forecast.
The farm profit before tax for the all classes sheep and beef farm for 2018-19 is forecast to average $129,700, a 2.8% fall on the previous year. The forecast allows for a manger’s salary.
Sheep revenues are expected to rise slightly, wool to rise but remain below five-year averages, cattle a bit lower year-on-year and crop revenues higher in the growing regions.
Total revenue per farm is expected to rise 0.7% to $545,900.
Farm expenditure is estimated to rise 1.8% to $416,200. Repairs, maintenance, feed, grazing and loan interest are forecast to fall but fertiliser costs to rise on a slight lift in volumes applied. Reduced debt and lower interest rates lead to the lower interest costs.
REGIONAL FORECASTS
Northland, Waikato, Bay of Plenty
Gross revenue down 2.5% to $418,700 with reductions in sheep, cattle and dairy grazing, which provide 89% of the total.
Cattle down 2.8% to $196,100 on lower cattle prices and numbers than the previous year but still well up on the five-year average.
Sheep revenues down 2.1% to $143,500 on the lower lamb crop. Farm expenditure marginally higher at a forecast $308,400 though fertiliser spend lower on a reduced tonnage on hill country farms.
Profit before tax on the average farm down nearly 10% to $110,300.
East Coast
Gross revenues marginally lower at $546,100 with sheep 4% higher at $292,40, the highest since 2011-12, with higher prices making up for lower numbers.
Sheep gains to be partly offset by cattle revenues down 9.4% to $171,800 with lower prices and fewer animals sold.
Weaner heifer prices remain high because of competition among breeders and finishers for beef replacements.
Total farm expenditure up 1% to $426,400, headed by wages and shearing costs.
Farm profit forecast up 5.2% to $119,700.
Taranaki, Manawatu
Gross farm revenue down 6.3% to $505,900 on lower sheep and cattle returns.
Sheep down 4.4% to $298,100 because of fewer lambs bred and sold.
Cattle revenues to fall 12% to $134,800 on combined lower numbers and lower prices.
In addition, dairy grazing income reduced an expected 22% to $12,300 as hill country farmers look to avoid the Mycoplasma bovis risk and instead target the strong sheep returns.
Total farm expenditure up 2.4% to $373,000 including fertiliser up 13% to $49,800 as farmers raise application rates after record profits last year. The rise in shearing rates is also a factor.
Farm profit before tax down a hefty 24% to $132,900.
Marlborough, Canterbury
Gross farm revenue up 3.3% to $711,800.
Sheep virtually steady at $266,600.
Cattle up 2% to $136,800 on a lift in numbers more than offsetting price falls.
Dairy grazing revenues up 13% to $60,800 because of increase on finishing and breeding farms, the most common Canterbury farm type.
Cash cropping revenues up 6.3% to $160,000, helped by greater wheat area and yields.
Wool up 3.3% to $53,000 on price gains from the previous two poor years.
Though cattle numbers are up overall, the report notes an anecdotal shift to sheep among mixed cropping and finishing farmers because of reduced soil damage and getting over the fear of labour in sheep.
Total farm expenditure up 2.8% to $575,900 with increases everywhere except interest costs and fertiliser.
Farm profit before tax increasing 5.4% to $135,900.
Otago, Southland
Gross revenues up 3.7% to $497,600 with sheep, cattle and wool all higher.
Sheep also up 3.7% to $343,000 as more prime lambs are sold at slightly stronger prices.
Wool also up 3.7% to $44,600 on higher prices.
Cattle revenues up a forecast 2.1% to $68,800, based on more breeding cows and heifers.
Total farm expenditure up 1% to $349,700 with decreases for feed and grazing and loan interest.
Feed costs are expected to fall 21% to more normal levels after the impact of last summer’s drought.
Farm profit before tax is expected to be up 10% to $147,900.
