Selwyn Times: October 17, 2017

SELWYN TIMES Latest Christchurch news at www.star.kiwi
Tuesday October [Edition 17 datE] 2017 41 3
SELWYN RURAL LIFE
Sheep &
beef farm
profits
forecast to
improve
As the 2017-18 meat export season
begins, Beef + Lamb New Zealand’s New
Season Outlook 2017-18 report forecasts
beef and lamb prices to remain similar to
the previous season, despite an expected
weakening of the New Zealand dollar.
The report estimates farm profit before
tax to increase 6.6 per cent to $90,200 for
2017-18 on average for sheep and beef
farms.
“This outlook sets the scene for steady
meat prices and production in 2017-
18. However, strong improvements are
expected in revenue from deer and velvet,
as production increases, and from wool,
which is coming off low prices,” B+LNZ
chief economist Andrew Burtt says.
Earnings before interest, tax, rent and
manager’s salary (EBITRm) per farm,
which provides a benchmark for viewing
farms on a comparable base, is forecast to
increase by 3.1 per cent to $158,800.
“A slight drop in the national sheep flock
was driven by a drop in breeding ewes, but
this was tempered by a lift in the number of
hoggets, particularly on the East Coast of
the North Island.”
A rise in the number of beef cattle (+2.8
per cent) was largely driven by weaner
cattle being carried over into the 2017-
18 farming year in response to good feed
conditions and firm prices, which were due
to tighter availability and strong store cattle
prices in 2016-17.
“As beef cattle prices have continued
at comfortable levels and production
conditions have improved, some farmers
have been motivated to increase the
number of beef cattle they have because
cattle are less labour-intensive than sheep.”
Mr Burtt says much of the outlook
depends on the value of the New Zealand
dollar, which is expected to ease as major
trading economies strengthen in 2017-18.
The New Zealand dollar strengthened in
2016-17, to average 71 cents against the
US dollar, up three cents on the previous
season.
“The US dollar is significant for New
Zealand’s export-focused sheep and beef
industry because 70 per cent of meat export
volume is sold in USD-denominated
transactions.”
Total farm expenditure is forecast to rise
marginally (+0.5 per cent) this season.
Though fertiliser prices are expected to
remain steady, a lift in spending on fertiliser
is expected as farmers continue to focus on
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improving their soils’ productive capacity.
The increase is expected to outweigh a
reduction in expenditure on interest, and
repairs and maintenance.
Much of the 6.6 per cent increase in the
average farm profit before tax on sheep and
beef farms results from revenue of deer and
velvet (+10 per cent), wool (+10 per cent)
and cash crops (+4.8 per cent). Sheep and
beef revenue are expected to remain similar
as small increases in production and easing
exchange rates counter softening export
prices.
Burtt says that while there were
disruptions to the international beef market
in 2016-17, demand is expected to remain
reasonable this year, driven by China.
Continuing tight sheepmeat supplies in
Australia and New Zealand, particularly
mutton, are expected to support prices,
with exchange rates the prime uncertainty.
Export lamb production is forecast to
increase marginally (+0.5 per cent) in 2017-
18. While exports to the EU, including the
UK, dropped in 2016 17, the EU accounted
for 36 per cent of exports and remained
greater than China. However, China
remained the largest single country market
for New Zealand lamb, accounting for 33
per cent of volume.
New Zealand beef production is expected
to be down slightly (-0.9 per cent) on last
season as the average carcass weight is
forecast to be lower.
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