That followed a decline of 32% in 2022-23 which meant profits for farmers had more than halved in two years, Beef + Lamb New Zealand’s new season outlook report said.
In a statement, BLNZ chief economist Andrew Burtt said that was a 15-year low when inflation was taken into account. The global outlook for the red meat sector remained fragile.
The latest Rabobank rural confidence survey, also released yesterday, showed the lowest reading in the 20-year history of the survey at -72%. The survey found 77% of farmers were expecting conditions in the broader agricultural economy to worsen over the next 12 months with only 5% expecting conditions to improve.
While a swathe of farmer concerns contributed to the record low sentiment, Rabobank New Zealand Country Banking general manager Bruce Weir said lower commodity prices had emerged as the chief source of farmer anxiety.
Mr Burtt said demand for red meat was expected to recover slightly from last year, although prices were expected to remain soft compared with the highs of two years ago, especially for lamb and mutton.
The pace of China’s economic recovery was uncertain and the economies of other key markets remained relatively weak. Australia was also expected to be highly competitive in New Zealand’s key markets such as China.
The BLNZ report said farm expenditure continued to climb, driven by inflation and high interest rates, reducing profit margins significantly. With lower profit and cashflow, farmers would be under immense pressure, while El Nino added another challenging dimension.
In Otago-Southland, farm profit before tax was forecast to drop 12% to average $92,500 per farm for 2023-24 following a decrease in profitability of almost 50% in the previous season.
Shearing expenditure was forecast to increase 2.9% in 2023-24 to average $28,900 per farm which was equivalent to $5.88 a head. The net wool account (wool revenue less shearing expenses) was forecast to break even, on average.
For most farm classes, shearing was a loss-making exercise and had been since 2019-20. The exceptions were the South Island high country and hill country farms where wool remained profitable due to the higher value of fine wools.
Mr Weir said the rising costs of inputs was the second-most pressing concern. Prices for key inputs such as fertiliser, fuel and feed all remained stubbornly high and, with farm income now significantly lower, their central focus was on identifying how they could strip unnecessary costs out of their businesses.
