NZ sheep and beef farming is on a knife edge with the exchange rate to decide which way it tips in the next six months reports

NZ sheep and beef farming is on a knife edge with the exchange rate to decide which way it tips in the next six months reports Country-wide.

That's the stark but honest picture painted by M&WNZ Economic Service manager Tim Hembrow at a recent Manawatu Breeding and Finishing Monitor Farm field day.

In a rundown on the Economic Service's mid-season update, Hembrow said market offshore prospects were positive for sheep. Global lamb supply was low and demand firm despite the high dollar.

On-farm inflation in relative terms was under control but the exchange rate and fluctuating fertiliser prices could put farm profits under pressure.

Economic Service data showed all of the downward drive on lamb and beef prices is from an unfavourable exchange rate.Hembrow said the number of lambs slaughtered and where the exchange rate goes in the next six months would be the key.

If the exchange rate rose any higher it could put NZ exports back to the worst position farmers have been in in 53 years or the decade average.

Hembrow said it also showed that the high NZ dollar clearly masked strong offshore prices. He posed the industry question of what was required for the next five years if the high dollar remains high.

Farm debt was another nasty.

The average debt across all sheep and beef farms rose from just under $400,000 in 2004-05 to about $600,000, 46% in three years. In stock-unit terms the provisional figure for 2008-09 is $14/su, a 68% rise on the 2004-05 figure of $8/su. The forecast for 2009-10 is for a fall to 59%. The service believed the figures were affected by restocking but in some instances farmers were borrowing to survive.

On-farm inflation for the past five years was an accumulative increase with it hitting 9.7% and 7.6% in the past two years.

On-farm sheep and beef prices were expected to remain stable at 0.5% for 2009-10.