Farm profits in the red meat sector are forecast to fall 54% in the 2023 -24 financial year.
Looking back further, the fall is 67% since the 2021-22 year.
Average farm profit is put at $62,600 per farm before tax, which brings farmers’ earnings down to the lowest levels since the 1980s, excluding the Global Financial Crisis.
This information comes from Beef + Lamb New Zealand’s (B+LNZ) Mid-Season Update 2023-24.
It says times are tough, and farmers will have to dig deep to stem the danger of widespread cash losses in the sheep and beef sector.
“The outlook for 2023-24 has worsened significantly since our forecasts in October, because there has been no recovery in China, and Australian exports of red meat have been bigger than originally forecast,” the report says.
“An excellent lamb crop last spring has meant there are more lambs to sell, but this cannot compensate for lower per head prices and unavoidably high costs.”
The report says China’s slow economic recovery is aggravated by increased supply from Australia, which is depressing prices.
“As a result, the forecasts for lamb and mutton prices for the season have been revised downwards,” the report says.
“The annual weighted average for all classes of lamb for 2023-24 is estimated at 651 c/kgCW (carcass weight), down 12% on 2022-23 and 13% lower than the five-year average.
“The annual weighted average of all classes of mutton for 2023-24 is estimated at 241 c/kgCW, down 34% on 2022-23 and 49% lower than the five-year average.”
This would reduce New Zealand’s export receipts for lamb and mutton by 4.8% and nearly 20% respectively.
Meanwhile, the problems for beef are far less than those for sheep meat.
This sector is being helped by demand in the US, where meat processing volumes are lower as farmers rebuild herds that had been driven down when an earlier drought dried up the supply of feed for the animals.
The all-beef forecast is 2.9% down on last year, but is still 2% higher than the five-year average.
The report adds that some classes of farm were hit especially hard, such as rough hill country and high country farms.
Sam McIvor, B+LNZ chief executive, adds input costs remain stubbornly high.
“We know farmers are feeling it, many have already worked hard on cutting costs and my conversations indicate they’re leaving no stone unturned to find additional savings. This is especially true for farmers with relatively high debt levels," McIvor says.
“They’re also looking to maximise income and taking stock to heavier weights and where feed allows.”
McIvor adds high interest rates and the uncertain prospects for significant falls are another problem.
“Driving productivity, intensely analysing cost of production, learning from each other, and utilising the right external advice will all be critical inputs into successfully navigating these tough times," the B+LNZ report concludes.
19 Comments
The bigger stuff is still selling for eye watering amounts, especially if sub-divideable, The smaller 1H ones are just large sites but in the country not selling that easy , 2.5-4H is sweat spot for horses and a few cows so high 2's early 3s selling
Most LSBs do not need much mortgage, they are buying lifestyles.
People with 2=300k horse trucks do not care much about mortgage rates, most have plenty of income cash flows etc.
OneWoof says in my area places on average selling 6% above CV.
I don't think so linklater, the appetite for planting purely for carbon is gone. This means remote farms will only be looked at by recreationalists.
Only farms in good locations are sellable. Our farm income is more than 30% down and the foreseeable future is not looking good.
Unlikely, forest land buyers have dried up until rules are clarified and even then will be shy and only locals. Now have banks telling farmers to sell some land and pay down debt but the only buyers are other struggling farmers - good luck. The banks will be ok for 1 season but if things don't improve next year....
Unless China comes back its not looking easy for sheep. Remember our Aussie friends still have over 70 million sheep and when the big dry hits there, as it will, this season will just be an introduction session I'm afraid.
Burgers still looking ok.
From BandL report. I can confirm all of below is happening - for the lucky ones who can do this. Carbon and timber is saving a lot of people at the moment out there.
However, off-farm and other sources of income may play a significant part in financing the
downturn. Other sources of funds include off-farm income, asset sales (land subdivision,
non-farm assets, shares etc.), carbon credits, sale of tree cutting rights, and early harvest of
plantations. Sheep and beef farmers have already applied these measures and will continue
to do so this season and likely into 2024-25.
The increase in dairying at the expense of sheep farming, in areas where practicable, is now somewhat beneficial as it results in block frozen manufacturing lean beef to blend in the production of the vast USA hamburger sector. From a NZ export point of view about as simple and inexpensive process that there is with plenty of shelf life.
Time the government looked at PES schemes;
https://en.wikipedia.org/wiki/Payment_for_ecosystem_services
It's a win-win.
Would be great Kate, unfortunately NZ doesn't have the income to support such a scheme. As farming only makes up a small proportion of total income in the EU, UK, USA etc they can afford subsidies.
There are some riparian planting subsidies but only a percentage of costs with no further payments. Basically of no use in propping up a farming business. Carbon payments are working on many farms but how long they last is the question hence the risk of planting now, with the up front costs to the farmer, is too great so unlikely.
100% on point there Hans.
For all its faults the ETS is the first time farmers can be paid for providing a service to community. To grow forests, native or exotic you need land and the only people with it are farmers and iwi.
You may be paid for carbon only but all the other benefits are accrued, environmentally and economically.
I can't fathom the negative farming comments about it when they hold the golden egg, land. They will decide what gets planted by doing it themselves, selling land or doing nothing.
Environmental groups wanting native only, and I'm certainly not anti native regen, simply do not believe in climate change as the simple maths shows native alone will not get the numbers we need by 2050 by a country mile. They are pursuing other agendas and arent holistic at all. Just read the CCC reports for the numbers.
Let's hope sheep prices come up as its not nice for a lot of my friends and I worry for them.
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