Sheep farmers will be hoping meat companies are light with
their predictions of $80 for lambs this season, with a farm
consultant estimating that it would cost at least that much
to produce them.
Geraldine farm consultant Peter Clarke said in an interview
that in 2007 it cost $67 to produce a lamb, but soaring fuel
and fertiliser costs had pushed that to $80 this year.
Fertiliser costs have risen from $6.50 a stock unit to $11.50
a stock unit before the latest price changes, and Mr Clarke
said this had helped push up farm working costs from $40 a
stock unit to $49 a stock unit.
In 1997 they were $26 a stock unit.
He based his calculations on a typical downland finishing
country farm, but said the equation would differ on store
lamb, high class finishing country or irrigated countryIt was
based on a 4000 stock unit owner-operator unit with casual
labour, and a 3000-ewe flock that lambed at 130% with all
surplus lambs finished.
Mr Clarke said he worked on costs that were adequate but not
extravagant.
Traditionally farmers have skimped on costs to take account
of inadequate product prices, said Mr Clarke, but he has
tried to take a more realistic approach.
Debt servicing was based on debt of $600,000, or $150 a stock
unit, and a return on capital 1.8%.
If farmers were to seek a 10% return on capital, Mr Clarke
said the price of lamb would need to be $183.
Labour and market rates of management were estimated at $15 a
stock unit.
Using these figures, he said his model farm would break even,
but that bottom line result would also be impacted by returns
for wool, cull ewes and beef.
He said farmers should not view $60 or $65 a lamb as
satisfactory.
"Some people are saying that, but it's not. It is inadequate
to cover costs and to give a reasonable return."
At less than $80 a lamb, his model farm would return cash
deficits, he said.
Meat companies have estimated mid-season lamb prices this
year at between $70 and $80 but a more favourable exchange
rate would push them over $80.
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