Sheep, cattle and wool profits increase
Strong lamb prices are expected to lead to higher profits for southern farmers, according to Beef + Lamb New Zealand’s New Season Outlook for 2018-19.
The organisation predicts that gross farm revenue is expected to increase 3.7 per cent to $497,600 per farm this year helped by an expected weakening New Zealand dollar and strong export demand.
The largest drivers of this increase are sheep, cattle and wool which contribute about 92 per cent.
The increase in sheep farm revenue 3.7 per cent to $343,000 for 2018-19 was due to a lift in the number of prime lambs sold at slightly stronger prices compared with the previous year.
On hill country properties sheep numbers appeared to be stabilising while on high country properties there had been a focus towards cross breeds and meat production.
Sheep revenue contributes 69 per cent of gross farm revenue on average in Otago-Southland, the report said.
Cattle revenue is expected to increase 2.1 per cent to $68,800.
Continuing strong cattle prices and the low labour requirement associated with cattle had encouraged farmers to maintain or lift herd sizes.
The average lift in the wool price was expected to offset the decline in volumes sold per farm.
Total farm expenditure is expected to increase 1 per cent to $349,700 for 2018-19 feed and grazing and interest the major decreases. Interest expenditure decreased 4.2 per cent to $40,500 due to some debt repayment and a decrease in the average farm interest rate. In the last 10 years interest expenditure has averaged $45,500 peaking at $53,000 in 2008-09.
Farm profit before tax increased 10 per cent to $147,900.
The average sheep and beef farm in Otago-Southland runs 3745 stock units on 720 hectares effective.
However, the average size was inflated by high country farms which average 6420ha compared with breeding-finishing farms which average 490ha and intensive finishing farms average 230ha.