Season outlook predicts increased profits

The reports suggests an average farm will see a lift to $109,900 this season – 9.6% more than last season, but 3.1% below the five-year average.

B+LNZ chief economist Andrew Burtt says this is positive news, at a time when the New Zealand economy will benefit from increased farm sector spending.

“This season, New Zealand’s 12,300 commercial sheep and beef farmers will spend a total of $4.66 billion on fertiliser, interest, repairs and maintenance and general farm operating costs. This will be welcomed by rural suppliers and communities, particularly at this time.”

Much of the extra profit is the result of an 11% lift in cattle revenue, which comes on top of a 12% increase in 2014-15. Meanwhile, sheep revenue is forecast to lift 2.6%, which includes a 4% increase in lamb farmgate prices, to an average of 547c/kg.

Burtt says international demand is expected to remain strong for beef, while tight sheepmeat supplies in Australia and New Zealand should support prices – although uncertainties remain around China’s demand for sheepmeat.

“In this context, the increase in export prices is primarily expected to come from a weaker New Zealand dollar. Over the next 12 months, the New Zealand dollar is expected to weaken against the three major currencies in which New Zealand agricultural products are mostly traded – the US dollar, Euro and British pound.”

Burtt says extreme weather events last season will affect the production side of the income equation in the new season. “Export lamb production is forecast to decrease by 6.3% in 2015-16. There is a smaller lamb crop, due to a decline of the ewe flock and a lower lambing percentage from the 2014-15 season’s high. On the same basis, we expect export mutton production to drop, after three years of high destocking rates.”

He says New Zealand beef production is also expected to be down – 5.3% – in 2015-16, after a record high in 2014-15, which was boosted by a high level of cull dairy cow processing in response to low dairy prices and high international demand for beef.

The full report can be found at http://www.beeflambnz.com/economic-reports