Monitoring report finds sheep & beef farmer optimism high

The Ministry of Agriculture and Forestry’s (MAF) 2004 Farm Monitoring report into sheep and beef production finds farmer confidence high and forecasts a six percent increase in gross incomes next year.

MAF senior policy analyst, Chris Ward, says the forecast income increase is due to a sustained low New Zealand dollar and continuing high schedule prices, particularly for lamb.

The farmer optimism is reflected in higher prices being paid for land, even though buyers are aware of the low return on farm assets. Most recent land sales have been to existing farmers.

MAF Policy runs the annual monitoring process to examine the production and financial status of farms in terms of the cash income and expenditure. Trends, issues and sector concerns are also monitored.

The model farms depicted in the report are representative of their farm type within their region. Farms around New Zealand have been examined, and information for each model is drawn from 20 real farmers, and discussions with a wide cross-section of agribusiness.

Chris Ward says the aim of each model is to best typify an average farm for the region, and budget figures are indicative figures of the average levels of income and expenditure, management, stock performance, debt and expenditure on development and capital purchases.

Some general trends itemised in the report are:

Sheep are currently more profitable than cattle and farmers with the highest net incomes tend to have high sheep-to-cattle ratios. For cattle, steer farming rather than bulls is gaining popularity. Farmers are increasing their use of nitrogen fertiliser to bolster feed supplies, particularly when feed shortages are predicted. Demand for rental land is high.

Chris Ward says land values have increased above earlier forecasts. “Even in flooded parts of the country (the lower North Island), land values continued to move up. In the all-class weighted-average national model, land values moved from $4,251 to $4,770 a ha, or 12 percent,” he says. “This is more than the long-term 15-year average of 10.5 percent. Interest rate rises have done little to dampen farmers’ enthusiasm for land purchases, it seems.”

Overall, farmers seem slightly pessimistic about next year’s wool prices. However, MAF forecasts a lift in wool prices in the 2004/05 financial year.

There was a marked increase in stock prices, especially for beef, in May and June 2004. Meat companies made greater profits in the second half of the financial year ended June 2004.

Some farmer concerns identified in the report include shortages of skilled labour; the costs of roading maintenance and electricity; uncertainty around methane emissions and how this may impact on their ability to farm for sustainable profits; and compliance costs.

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