Landcorp - Crown Ownership Monitoring Unit

Note 20 – Effect of DroughtDuring 2009/10, the upper North Island of New Zealand experienced a major drought. A number of Landcorp’s properties were impacted by thisdrought, which materially affected feed conditions on affected properties. The drought markedly increased farming costs, especially purchased feedcosts, which were much higher than budget due to both increased feed prices and the requirement to purchase higher quantities than expected.In addition, there was a reduction in both milk and livestock production due to this drought.In 2008/09, Landcorp incurred carry-over effects from the severe widespread drought of 2007/08. The predominant 2008/09 effects were a lowerlambing percentage, carry-over costs and additional feed costs.Landcorp has estimated the cost of these droughts as follows:Group Group Parent Parent2010 2009 2010 2009$000 $000 $000 $000Forgone RevenueReduced livestock sales values 929 8,400 929 8,400Reduced milk revenue 3,165 900 3,165 9004,094 9,300 4,094 9,300Increased ExpensesPurchased Feed 285 200 285 200Grazing 386 100 386 100Other costs 100 200 100 200771 500 771 500Total Estimated Cost of Drought 4,865 9,800 4,865 9,800The estimated costs of the droughts are based on the following assumptions:Reduced milk revenue is based on reduced milk production from budget specifically identified on drought affected properties, valued at Landcorp’saverage sales price. Landcorp considers that the milk production budget on these drought affected properties would have been met if there hadbeen a ‘normal’ milking season.Reduced livestock sales are based on the estimated loss on lower lamb and cattle finishing weights.Increased expenses are based on specifically identified expenses arising from the drought.Note 21 – Accounts ReceivableGroup Group Parent Parent2010 2009 2010 2009$000 $000 $000 $000Trade debtors 3,647 2,778 3,512 2,607Receivable from subsidiaries – – 590 418Milk income receivable 13,414 9,051 10,441 6,087Other receivables and prepayments 11,107 9,011 10,091 7,461Total Accounts Receivable 28,168 20,840 24,634 16,573The increased milk income receivable reflects a higher forecast milk price this season, combined with slightly higher production levels.See Note 36 for the impairment of accounts receivable.71