By Allan Barber

The Ministry of Primary Industries' (MPI) 2012 pastoral farm analyses, taken from the Farm Monitoring Report, show significant falls in income predicted for dairy, and sheep and beef, and an increase for deer farming.

The reports show typical income patterns based on information gathered from a representative sample of farm properties.

The 2011/12 year was profitable because of favourable growing conditions which saw a 10% lift in dairy production offset the lower payout, while higher prices for sheepmeat combined with better farm productivity generated an 18% increase in cash profit. Deer farmers are enjoying a period of price stability and good productivity.

The forecast profit for the 2012/13 year is well down on last year with the exception of deer farms which is expected to be at a similar level.

The 20% drop in payout expected this year will result in a 57% reduction in profit before tax from $1.98 per kg of milk solids to 87 cents.

At this level farms with high debt levels will be under threat.

The situation for sheep and beef farmers is not expected to be so dire. Although market and procurement prices will be lower, and they need to be given the state of consumer demand, farm profit is budgeted to be 15% down on last year, but the second highest since 2000. Last year was exceptional and unlikely to recur in a hurry, so an average NPBT of $181,000 is quite reasonable and unusually nearly $45,000 better than the dairy farm average.

Deer farming performance differs substantially between North and South Islands, but both are budgeted to be above last year, and in the case of the South Island higher than dairy farm profit.

The analysis also notes a divergence in dairy farming methods, between low-cost, low-input farming including once a day milking and high-cost, high-input systems which might include feed pads and herd homes; these farming methods require completely different management skills.

In addition there are several challenges facing farmers, such as nutrient runoff into waterways, mandatory electronic tagging, Trading Among Farmers for dairy farmers, land use change and succession planning for sheep and beef farmers.

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Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he runs a boutique B&B with his wife. You can contact him by email at allan@barberstrategic.co.nz or read his blog here »