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22 September 2006
The Ministry of Agriculture and Forestry's (MAF) 2006 monitoring
report into the status of the sheep and beef farming sectors reports a tough
past year, but some optimism about the near future.
The author of the Sheep and Beef Monitoring Report, John Greer, says the key
issue for sheep farmers in the 2005/06 year was a sharp fall in export lamb
prices – down by nine to ten dollars a head. Beef and wool revenue
The report is part of an annual process where MAF monitors the production
and financial status of farms. Trends, issues, and sector concerns are
also monitored. The reports are based on model farms designed to best
typify average farming operations within specific regions and information for
each model is drawn from real growers and a wide cross-section of
The drop in lamb returns saw the cash farm revenue on the national sheep and
beef model fall eight percent to $320,800, despite a record high lambing
"Farmers were unable to slow their operating or capital spending in
the face of the decline in product prices and revenue from December
2005," John Greer says. "Consequently a disposable deficit of
$45,300 was incurred on the model sheep farm.
Mr Greer says sheep farmers continue to focus on improving productivity,
with changes in sheep breeds to improve lambing percentage being a common
"Farmers are also changing pasture varieties and using nitrogen
strategically in order to up production."
With cattle, the report finds farmers are deploying tactics such as buying
weaner bulls instead of bull calves, buying younger trading cattle and holding
onto their cattle longer in a bid to maintain trading margins.
John Greer says because farmers have spent above maintenance levels on
fertiliser, repairs and maintenance in recent years, many are feeling
comfortable deferring spending in these areas for the next couple of years.
Finding good quality permanent labour has proved an issue for farmers,
putting stress on them and their families.
Looking to the future, the lamb price is expected to rise four to five
dollars per head in 2006/07.
The report says the industry predicts stock numbers will increase slightly
and gross farm revenue is expected to increase five percent to $339,000.
"This is, however, dependent on farmers' assumptions for lambing
percentages to hold and prices to improve as predicted. For many of the
models, industry observers felt farmers were a little optimistic in their
estimate of lambing percentage," Mr Greer says.
Cash farm expenditure is expected to increase slightly overall. But Mr
Greer says with a dramatic reduction in tax payments expected on the back of
the low 2005/06 profit, farmers expect the disposable surplus on the national
average sheep and beef model to recover to $5,500.
"Overall, financial performance is expected to be better than last
year but still at the lower end of the range, with cash farm expenditure at 60
percent of gross farm revenue, and return on capital only 1.5
The report notes that the financial effects of the heavy snows in Canterbury
this winter are not yet known. "It is, however, anticipated
that farm profitability will be reduced through the cost of feed purchases and
reduced stock performance," John Greer says.
For further information, please contact:
John Greer, Regional Team Leader, MAF Policy
Ph.: 03 358 1864 or 0274 327 692
The full report can be viewed online at: