Rural Economy: Profitability set to tumble for sheep & beef farmers
February 8th, 2010
Sheep and beef farm profitability is set to fall almost 50% this season on the back of falling farm incomes and the continuing adverse impact of a volatile NZ dollar. Meat & Wool NZ’s Mid-Season Update for 2009-10 estimates there will be an 8.6% decrease in total gross farm revenue to $317,600 for the average sheep and beef farm in 2009-10. On the plus side, on-farm input prices are forecast to be relatively stable rising just 0.5%, a far cry from the 9.7 and 7.6% increases experienced in the previous two years. However, this is not enough to offset falling farm gate prices with average farm profit before tax tipped to be $37,400, down from 2008-09′s $58,800.
Meat & Wool NZ Economic Service Director, Rob Davison says the NZ dollar appreciated remarkably over 2009, compared with the previous year. He notes this is particularly bad for the sheep and beef sector as the dollar’s rise has been most noticeable against the US dollar, British pound and Euro where the majority of NZ’s beef and lamb are sold. This is expected continue in the first six months of 2010.
Export volumes for wool, lamb, mutton and beef are also forecast to be similar to last year. However, the exchange rate factor will reduce export receipts to $5.4bn, down 12% down on 2008/09. Lamb export receipts are tipped to fall 10% to $3.4bn while farm gate lamb prices are expected to average $72 per head for a 17.5 kg lamb, compared with $89 last year, a drop of almost 20%. Beef export receipts are expected to drop 18% to 1.9bn.
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