Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


“Correction” predicted for sheep and beef farm profits

17 September 2012

“Correction” predicted for 2012/13 sheep and beef farm profits

Beef + Lamb New Zealand’s (B+LNZ) New Season Outlook is expecting a correction that is likely to see average sheep and beef farm profit settle at around $96,500 for the 2012/13 season.

B+LNZ Economic Service Executive Director Rob Davison says profit before tax rose 30 per cent in 2011/12, which means this season’s predicted 34 per cent drop could be interpreted as a correction, from what was a near record farm profit in the 2011/12 year.

“While disappointing, it’s not entirely unexpected given the global recession,” says Davison.

Looking ahead, he says the exchange rate scenario used for this outlook is for the value of the New Zealand dollar to remain near last year’s level against the US dollar. This was the highest annual average since the NZD was floated in 1985. The NZD is expected to strengthen around 2 per cent against the Euro, while remaining steady against the UK pound.

“These are the main currencies that influence the sheep and beef farm sector, keeping in mind that around 90 per cent of meat and wool production is exported. Under this exchange rate scenario, the average New Zealand sheep and beef farm profit before tax would be around $96,500 for 2012/13. Lower exchange rates would improve returns to farmers just as a higher exchange rate has the opposite impact.

“What is important is where the exchange rate will be from November to June when the majority of production is exported.”

Davison says the lower level of farm profit is largely due to lower prices and revenue from wool and lamb sales. Beef revenue is expected to hold.

“The profit decrease directly reflects head winds from the recessionary trends in Europe and flow-on from the global financial crisis that continues to lower economic activity and confidence around the world.

“On the upside, even though the growth engines of China and India have slowed, they remain a positive influence on the global economy and China is an increasingly important lamb market, now New Zealand’s fourth largest single country market by value.”

Davison predicts sheep revenue overall will fall 16 per cent, dominated by lower export lamb and mutton prices, down 16 and 18 per cent respectively. However, this will be partially offset by the size of the lamb crop, which is expected to be up 870,000 head on last year due to more lambs born per 100 ewes.

Wool revenue is predicted to fall 24 per cent.

Beef cattle revenue remains similar to last year. Higher prime cattle prices, up 2.5 per cent, are offset by cattle weights, which are predicted to ease from last season’s high. However, export beef production is expected to lift, with increased numbers of cull dairy cows this season.

Overall, gross farm revenue falls 11 per cent, while on-farm expenditure drops only 1 per cent, Davison says. “As a result, the fall in gross farm revenue essentially cuts straight into farm profit, with on-farm expenditure largely fixed in the short run.”

At a national level, export receipts from meat and wool products are estimated at $6.1b for 2012/13, 3 per cent lower than last year. A 9 per cent fall in wool and sheep meat exports of $355m is predicted, but this will be partially offset by a $185m (7 per cent) increase in beef product export receipts.

The full outlook – including the farm situation, export volumes and prices – is on the Beef + Lamb New Zealand website at:

© Scoop Media

Business Headlines | Sci-Tech Headlines


Consumer NZ: Buy-now, Pay-later Raking In $10m+ In Late Fees Annually

A Consumer NZ survey has found buy-now, pay-later services are costing shoppers more than $10 million a year in late fees. Close to four out of 10 Kiwi consumers use buy-now, pay-later services, such as Afterpay, Laybuy and Zip... More>>

Westpac: Catherine Mcgrath Appointed New Zealand CEO

Westpac Group CEO Peter King and the Westpac New Zealand Board today announced the appointment of Catherine McGrath as Chief Executive Officer, Westpac New Zealand... More>>

Amazon: AWS To Open Data Centres In New Zealand

Today, Amazon Web Services (AWS), announced plans to open an infrastructure region in Aotearoa New Zealand in 2024. The new AWS Asia Pacific (Auckland) Region will consist of three Availability Zones (AZs) and join the existing 81 Availability Zones across 25 geographic AWS Regions at launch... More>>


Statistics: Surge In Imports Results In Record Monthly Trade Deficit
Imports increased $1.8 billion in August 2021 compared with August 2020, resulting in a record monthly trade deficit of $2.1 billion, Stats NZ said today. Exports were little changed, down $42 million. "This is a larger deficit than normal because of higher values for imports.. More>>

Fonterra: Completes reset, announces annual results and long-term growth plan out to 2030

Fonterra Co-operative Group Limited today announced a strong set of results for the 2021 financial year, reflected in a final Farmgate Milk Price of $7.54, normalised earnings per share of 34 cents and a final dividend of 15 cents... More>>

Statistics: GDP rises in the June 2021 quarter

Gross domestic product (GDP) rose by 2.8 percent in the June 2021 quarter, following a 1.4 percent increase in the March 2021 quarter, Stats NZ said today. June 2021 quarter GDP was 4.3 percent higher when compared with the December 2019 quarter... More>>