Sheep and beef farmers may be in for a tough time with
profits predicted to halve this season as the full impact of
lower lamb prices and widespread drought starts to hit home.
Beef and Lamb New Zealand's economic service mid-season
update has estimated farm profit before tax for the 2012-13
season will fall 54% on last season to an average of $73,000
across New Zealand, largely due to sharply lower lamb prices
and a consequent 27% decrease in sheep revenue.
In Otago-Southland, farm profit before tax was expected to
decrease 46% to $114,100 per farm, while total gross revenue
was predicted to decrease 21% to $403,300. Sheep account
revenue was expected to fall 27% to $252,000, and cattle
account revenue was expected to fall 3.7% and wool revenue
North Otago Federated Farmers president Richard Strowger, who
is on the rural lobby organisation's meat and fibre national
executive, said farmers needed to ''once and for all'' take
stock of their industry.
The only way they could do that was to support two
co-operatives, as that was the only way they would have a
''If farmers are sick of what it is, they have to decide who
is going to give them the best income and direction over the
next 20 years and support that company,'' he said.
While it might be ''rough'' initially, they needed to make
that decision and get on and support that company.
Otherwise, more and more sheep and beef land was going to be
lost to dairy support.
''If it can't dairy, it'll go dairy support,'' he said.
Farmers seemed to be struggling to get a consensus of what
was the best way forward. Farmers tended to blame meat
companies and meat companies tended to blame farmers but that
behaviour had to stop, Mr Strowger said.
While lamb numbers were up nationwide, thanks to a 123%
lambing last spring and more hoggets producing lambs, that
was not sufficient to offset the lower lamb price and impact
of drought, Beef and Lamb NZ economic service executive
director Rob Davison said.
The forecast average lamb price of $85 per head was down 25%
from last season's $113.60, which was the second-highest on
''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
Maintaining prices for lamb would be ''challenging''.
Europe's debt crisis was far from being solved and there was
almost no growth in the region, there were concerns about
economic prospects for the United States and China's economic
growth had slowed to the lowest rate in a decade, he said.
Cattle returns were predicted to drop 8.8% but the outlook
was ''relatively positive'', thanks to the supply situation
in the US.
Three years of drought had reduced the country's total cattle
numbers to 89.3 million head, the lowest tally since 1952.
The beef cow herd was the smallest it had been in decades and
it would take years to rebuild breeding numbers, he said.