Sheep and beef farm profits on the rise after last season's dip
Sheep and beef farmers can look forward to a boost in profits by $8000 to a total income of $75,000 this season thanks to a combination of better lamb prices and improved grass growth.
The before-tax forecast to June was cautiously welcomed by Federated Farmers meat and fibre spokesman Rick Powdrell, who said the figure was still too low.
"It's positive but we need farmers to be making considerably more than that for them to improve their properties and move forward."
Poor wool prices were proving to be a drag on incomes, with an average fall of 25 per cent on last year's four-year high.
Global demand for sheepmeat remains firm due to tighter supply from the two largest exporters – Australia and New Zealand – which has led to improved farm-gate sheep prices that are up 20 per cent on 2015-16.
Sheepmeat exports for the season are tipped to fall by 4 per cent, to 442,700 tonnes.
Beef prices are expected to average $5.03 and $4.92 per kilogram for steers/heifers and bulls respectively, still high compared to their five-year averages.
Cattle revenue is forecast to remain near that originally estimated for 2016-17. The average price across all classes of cattle is expected to ease by 5.6 per cent, but an increase in the average carcase weight partly offsets this price drop.
Beef + Lamb New Zealand chief executive Sam McIvor conceded that "profitability is still not great".
"But farmers are in a better space and are confident of their ability to feed stock. We're seeing ewes in excellent condition for mating and we also expect to see strong hogget mating numbers."
Powdrell said a recent visit to Europe graphically showed the direction New Zealand exporters needed to be heading if profits were to improve.
"I was in a supermarket near Geneva watching as staff were stocking ready-to-eat portion-size cuts of beef and lamb into chillers, and they were being snapped up as fast as they being put up."
He said consumers were demanding smaller cuts rather than traditional legs of lamb.
In a French town he spoke with a French butcher who told Powdrell New Zealand produced the finest lamb. He wanted to source some, but also wanted to know from what farm it came.
New Zealand exporters needed to continue their work on telling consumers where a product is from because that resonated with consumers.
After a poor start to the year, farmgate prices for prime lambs are now around $5.60 to $5.80/kg. Across the entire 2016-17 season, the prime lamb price is forecast to average $4.95/kg – or $91 per head – and lambs are forecast to average 18.4kg carcass weight.
McIvor said despite negative talk about declining sheep numbers, the number of hoggets retained was forecast to be similar to last season, indicating farmers were still strongly committed to sheep.
Beef exports are expected to be down by 1.8 per cent to 607,000 tonnes as the number of cull dairy cows processed declines further.