Profits tipped to fall in sheep and beef industry

New Zealand sheep and beef farm profits are expected to decline in the coming year as higher spending outweighs a lift in revenue from the products they sell.

The average farm is expected to earn a pre-tax profit of $129,700 in the June 2019 year, down 2.8 per cent from a pre-tax profit of $133,500 in the 2017/18 year, according to industry group Beef+Lamb New Zealand.

Beef+Lamb forecasts farm revenue will lift 0.7 per cent to $545,900 in the coming year, driven by increased revenue from sheep.

It expects sheep revenue, which contributes 48 per cent of farm revenue, will lift 1.2 per cent to $263,600 driven by strong farmgate prices.

Wool revenue is expected to increase 5.3 per cent to $37,600 as a lift in prices offsets a decline in volumes. Cattle revenue is seen dropping 3.7 per cent to $142,500 due to softer average beef cattle sale prices, the organisation says in its New Season Outlook published yesterday.

Average farm expenditure is expected to rise 1.8 per cent to $416,200. Beef+Lamb said spending was expected to rise in all parts of farm businesses except for repairs and maintenance, interest costs and feed and grazing.

The organisation forecasts beef, lamb and mutton prices to remain firm at historically high levels, helped by the weaker New Zealand dollar and strong export demand.

“We forecast slight increases in farm-gate prices for lamb and mutton in 2018/19, as prices are expected to remain relatively steady in New Zealand’s main export markets and benefit from an expected easing of the New Zealand dollar,” said Beef+Lamb chief economist Andrew Burtt.