Friday, 17 March 2023 12:25

Red meat farmers could see profits fall more than 30%

Written by  Staff Reporters
B+LNZ chief economist Andrew Burtt. B+LNZ chief economist Andrew Burtt.

While the outlook for global sheepmeat and beef trade is improving, Beef + Lamb New Zealand (B+LNZ) says it expects farmer profitability to fall sharply due to reduced livestock prices and continued high inflation.

The B+LNZ Mid-Season Update 2022-23 says that farm profit before tax is estimated at $146,300, a 31% decrease from the 2021-22 season and below the average for the past five years.

“Inflationary pressure is causing on-farm costs to increase sharply, eroding the benefit of what are still historically pretty good farm-gate returns,” says B+LNZ chief economist Andrew Burtt.

The forecast uptick in global sheepmeat and beef trade is supported by generally solid fundamentals in key markets, with demand projected to recover, while global supply levels remain tight.

This follows a stark drop in sheepmeat at the start of the season before China relaxed its Zero Covid policy.

“As 85% of New Zealand’s mutton exports are to China, this impacted export receipts, which were one-third lower compared to the same period last season,” says Burtt.

However, a recent case of bovine spongiform encephalopathy (BSE) in Brazil has added fuel to a tightening global beef market.

As falling farmgate prices lead to a decrease in revenue, farmers have sought to reduce costs by deferring repairs and maintenance and reducing fertiliser use, but inflation and the increasing price of farm inputs are outweighing cost cutting initiatives.

“Overall expenditure has increased to an average $531,500 per farm in 2022-23,” Burtt says.

“Fertiliser, lime, and seeds expenditure is forecast to increase by 6% to average $102,100 per farm, following a 15% increase last season.

“This is the largest area of expenditure for sheep and beef farms at around 19% of farm expenditure in 2022-23.”

Interest rate rises and increased overdraft borrowing is forecast to increase interest expenditure 12.5% above last season – averaging $54,000 per farm.

As farmers refinance and extend overdrafts while receiving lower farmgate prices, managing cashflow will be a challenge this season.

To add to the financial pressures facing farmers, the full impact of Cyclones Hale and Gabrielle is not yet known.

“Weather events like Cyclones Hale and Gabrielle and flooding during January means farmers will be rebuilding vital infrastructure, this will significantly lift repairs and maintenance expenditure and much of this spending will be on extended overdrafts,” says Burtt.

“Slips and silt destroyed farm infrastructure and stock losses are not fully accounted for after Cyclone Gabrielle. The economic impact on the supply chain for agriculture will be felt for years to come,” he says.

Meanwhile, conditions are extremely dry in Otago and Southland placing a different pressure on farmers.

B+LNZ chief executive Sam McIvor says the significant financial pressures farmers are facing are another reason the Government should put brakes on its raft of environment policy changes.

“Farmers are already feeling overwhelmed with the environment-related policy changes, on top of reduced revenues and high on-farm inflation.  For some, they’re also now faced with having to rebuild their businesses after severe weather events like the cyclones,” says McIvor.

Almost one-third of New Zealand’s sheep and half of New Zealand’s beef cattle are in the North Island regions that were subject to a state of emergency following the cyclones,” he says.

“When farmers are impacted in this way, it has a knock-on effect to the wider economy including businesses that service farms like vets, trucking companies, shearers and many more.

“Simply put, the Prime Minister needs put a stop to the tsunami of legislation and regulations that is constraining the food producing export earning sector,” McIvor says.

“This is the time to get behind the sector, so farmers can navigate this financially challenging time, plan ahead, and ensure their businesses remain sustainable in every sense of the word.”

More like this

No easy ride for struggling sheep farmers

Stubbornly high farm input costs, a slow Chinese recovery and a flood of Australian lamb onto the global market are the main factors contributing to the tough times being faced by NZ's sheep farmers.

BLNZ fee increase rejected

Frustrated red meat farmers soundly rejected a move by the Beef + Lamb New Zealand board to increase its director fees.

Red meat farmers welcome suspension of SNAs

Beef + Lamb New Zealand (B+LNZ) has welcomed the Government’s announcement it is suspending the requirement for councils to comply with the Significant Natural Areas (SNAs) provisions of the National Policy Statement for Indigenous Biodiversity for three years while it replaces the Resource Management Act (RMA). 

Tone deaf?

OPINION: Your old mate can't believe the absolute brass neck of the directors at Beef + Lamb NZ who are asking levypayers for a hefty increase in directors fees at the time of record low red meat prices.

Featured

Sheep drench resistance costly

Analysis by Dunedin-based Techion New Zealand shows the cost of undetected drench resistance in sheep has exploded to an estimated $98 million a year.

Dairy sheep and goat turmoil

Dairy sheep and goat farmers are being told to reduce milk supply as processors face a slump in global demand for their products.

Hurry up and slow down!

OPINION: We have good friends from way back who had lived in one of our major cities for many years.

National

Knowing bugs means fewer drugs

A mastitis management company claims to deliver the fastest and most accurate mastitis testing available at scale for New Zealand…

Machinery & Products

AGTEK and ARGO part ways

After 12 years of representing the Landini and McCormick brands in New Zealand, Bay of Plenty-based AGTEK and the brands’…

100 years of Farmall Tractors

Returning after an enforced break, the Wheat and Wheels Rally will take place on the Lauriston -Barhill Road, North-East of…

JD unveils its latest beast

John Deere has unveiled its most powerful tractor ever, with the launch of the all new 9RX Series Tractor line-up…

Biggest Quadtrac coming to NZ!

In the biggest announcement that Case IH Australia/New Zealand has made around its tractor range, its biggest tractor is about…

» Latest Print Issues Online

The Hound

Why?

OPINION: A mate of yours truly wants to know why the beef schedule differential is now more than 45-50 cents…

Fat to cut

OPINION: Your canine crusader understands that MPI were recently in front of the Parliamentary Primary Sector Select Committee for an…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter