The release of the national average market values of livestock by the Inland Revenue Dept shows huge falls in capital prices of sheep and beef in the 2013 livestock year.
On a 3,000 ewe farm running supporting hoggets and a 100 calves, this drop in value totals to $228,000, and with the resulting downturn in land values due to the drought and low sheep income, will eat significantly into the equity position of highly geared farms.
In the sheep sector, values are back to where they were four years ago and the past years progress at revitalising profits has all been lost, and this presents significant challenges to all in the meat industry.
The only small solace into this sorry state of affairs will be the tax writedowns that may compensate for some of this years financial hardship due to drought and poor returns.
With lamb numbers predicted to be down another 3 million head next spring this financial pressure will continue for some years yet, and urgency to find a long term solution is needed from all participants for this sector to survive sustainably.
Average flock values have fallen 38% to $102 a head in a normal aged flock from last years high of $164, which shows a dramatic erosion of capital.
Many flocks in the middle of the drought area will have market values lower than this as feed shortages have left some stock in below average condition.
Beef values fell more on the back of the drought than poor prospects from market returns, although a strong dollar and a surplus of animals offered to the processors kept income for the year lower.
And with a 4% drop in the national herd predicted for next year due to the North Island drought, opportunities for a beef recovery will be limited.
Average calf values showed a $110 /head drop in price from last year to $501 mixed sex, some of which will be attributed to lower weights from the calves and some part due to a resticted feed market, which is often a big influence in setting these animals values.
Mixed aged cows also fell in value to $872 a head, with many farmers having to cull heavily the tail end of their herds as a feed saving measure.
It is also interesting to note optimism for future growth remains in this sector showed by beef farmers paying more for their breeding bulls than last year.
The deer livestock values make disappointing reading and gives this sector little optimism that growth will return anytime soon.
While venison and velvet returns has been described as solid and stable, (not always evident in the industrys history), values for weaner animals, especially surplus females are barely sustainable.
Processors report potentially good young female stock are still being killed and that is a concern especially as for prices to lift, the European economies need to recover and the currency weaken, both of which at this stage look unlikely to occur quickly.
Red weaner animal values dropped to about $212/hd mixed sex and mixed aged hinds back 8% to $416, with now a significant premium in wapiti type genes with both young animals (+$46) and mixed aged hinds (+$169) significantly dearer in price.
Amid a dairy boom where demand for animals for conversions seemily insatiable, this years values are surprisingly easier than last years record rates with the weaker payout and dry conditions probable reasons. Rising costs of production, and tightening and more cautious credit rules have also prohibited dairy animal prices spiraling out of control as a focus on dairy debt is being watched very carefully by lenders.
Cow prices on mixed breeds are 14% back on last years inflated levels to $1,750 a head, and new convertors will be hoping these values link closely with milk returns so they can keep debt levels managable.
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