Profit drop a global trend

Rob Davison
Rob Davison
A predicted fall in sheep and beef farm profits for the 2012-13 season, while disappointing, is not entirely unexpected given the global recession, Beef and Lamb New Zealand economic service executive director Rob Davison says.

Beef and Lamb's new season outlook expected a correction that was likely to see average farm profit settle about $96,500.

Profit before tax rose 30% in 2011-12, which meant this season's predicted 34% drop could be interpreted as a correction, from what was a near record farm profit in the 2011-12 year, Mr Davison said.

The lower level was largely due to lower prices and revenue from wool and lamb sales. Beef revenue was expected to hold.

"The profit decrease directly reflects headwinds 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," he said.

On the upside, although the "growth engines" of China and India had slowed, they remained a positive influence on the global economy and China was an increasingly important lamb market.

Mr Davison predicted sheep revenue would fall 16%, dominated by lower export lamb and mutton prices, down 16% and 18% respectively.

That would be partially offset by the size of the lamb crop, which was expected to be up 870,000 head on last year. Wool revenue was predicted to fall 24%.

Overall, gross farm revenue was expected to fall 11%, while on-farm expenditure dropped only 1%.

Export receipts from meat and wool products were estimated at $6.1 billion for 2012-13, 3% lower than last year.

A 9% fall in wool and sheep meat exports of $355 million was predicted, but that would be partially offset by a $185 million (7%) increase in beef product export receipts.

In Otago-Southland, average sheep and beef farm profit was likely to be $132,700.

Beef and Lamb southern director Leon Black said incomes were down, largely due to lower mutton, lamb and wool returns, which accounted for 77% of Otago-Southland sheep and beef operations' gross farm revenue.

With lower prime lamb prices, there tended to be lower store prices. On a positive note, lambing percentages across the region should be up on last season, by an estimated 2.3 percentage points to 131%, he said.

Central South Island electorate director Anne Munro said the news was "not all bad".

Ewe condition in traditionally drier parts of Otago was excellent, and Southland was equivalent to last year.

Lambing was affected by adverse weather during the previous two seasons. Expectations and hope was for more benign weather conditions this lambing, although recent snow had not been helpful, Mrs Munro said.