Sheep and beef farmers have been told they can look forward to another high-earnings year, after pre-tax profit jumped 75 per cent in the past year as lamb and wool remains in demand in key markets.
Average farm income before tax is estimated at $106,200 in the June year ahead.
Beef + Lamb New Zealand economist Rob Davison says this will be a slight dip after the dramatic 75 per cent rise to $114,200 in income for the year ended June 30.
Davison’s predictions in the farmer body’s new season outlook are based on exchange rates of US81c, 50p and 0.59 to the New Zealand dollar.
He also gives estimates of what a shift in the US dollar rate would mean. At US91c, income would drop to $62,000, but at 71c, it would climb to $157,100.
Last year’s strong earnings came from a 43 per cent jump in lamb prices, a 62 per cent rise in other sheep meat prices and a 43 per cent leap in wool, from a 100-year low. Beef was up 18 per cent.
This was the best year, in inflation-adjusted terms, since 2001-02, Davison says.
Looking ahead, he predicts prices to remain at around the same levels but for more meat to be sold.
He expects a rising exchange rate will cut into that extra income leaving gross farm earnings unchanged.
Farmers are expected to spend more on their farms, particularly on fertiliser, which will eat into net earnings.
Davison says that after tax is paid, farmers will reduce debt and spend on machinery and living expenses.
This year, lamb export receipts are expected to remain at $2.9 billion.
Beef is likely to ease 2.1 per cent to $2.6b, with exports up 3.1 per cent but on 5 per cent lower prices from an expected increase in the exchange rate.
Davison says wool production is estimated to fall 1.3 per cent due to lower sheep numbers but with some offset from an increased clip.
Wool export receipts are predicted to remain similar to the previous year at $718 million.
He also provides regional estimates, saying Taranaki-Manawatu farmers will be spending big on fertiliser, after deferring it in recent years. Average pre-tax profit is expected to be $116,000.
In the East Coast-Hawke’s Bay-Wairarapa region, lamb production is expected to fall as replacements are kept to rebuild drought-hit flocks.
Pre-tax profit is forecast to fall 28 per cent to $93,900 after farm maintenance spending.