It seems timely that a balanced picture of farmings taxation responsibilities, will be shown in the livestock average market values released by IRD, late last week. Large increases in values for sheep, cattle, and dairy stock will lift farmers net profit, along with a substantial rise in gross returns from better prices. Look Here for latest figures.
The furore caused by the story about dairy farmers average tax payments in the 2008/09 year, showed a lack of understanding of the profitability of farming and the lag effect of payments due. The 2010/2011 season will redress that inbalance from that earlier unprofitable year. However, many farmers may not be that much better off cash wise, as bankers will be insisting on a taxable debt repayment, to reduce low equity.
What makes this year special (except for those affected by the spring storms, and pre Xmas dry in the north) is the coiniciding of grass production and good commodity prices, which history has proven is not that usual. Net profit returns, and return on capital invested, have been low in agriculture in the past, as tax earned is often greater away from the farm gate.
If farming can have a few more good years to lower the debt, and improve the return on investment from the business, managers will not have to use the increase value of the land, to calculate a competitive return compared to other businesses.
Sheep values in the 2010/2011 have seen ewe hogget prices rise by 36% as managers renewed their flocks with younger sheep and culled ewes harder. Many will have mated the best of these hoggets, so a 70-80% lambing and improved wool prices will make this historically poor profit stock class, competitive again. Two tooth ewe values lifted more (31%) than mixed aged classes (25%).
Good lifts were also seen in all beef classes with cows leading the pack with average values rising 26% and younger heifers and steers by 6-14%.
Dairy cattle values did not rise as high as happened in the 2008 year and reflects the greater discipline held by the financial sector to the big debt this sector holds. Cows did rise by 22-28% on the year before, and the 24-49% lift in heifer values showed optimism for further growth in this industry.
The deer sector was the only one to show a drop in breeding herd values, with mixed aged hinds dropping by 5 % even though younger animals lifted by 25%. The lack of growth by this industry is recognised by it's leaders, and with strong product prices will be an opportunity for smart operators to cash in on.
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