Canterbury/Marlborough Hill Country

Model Description

This model represents hill country farms in Marlborough, Canterbury foothills and Banks Peninsula. Most farms breed replacements, finish up to 50% of their sheep stock and run breeding cows.

Up to 30% of the area is able to be cultivated and, occasionally, some irrigation and cropping is undertaken. Farms produce Corriedale or Crossbred wool, with some fine wool producers.

Changes to farm area through leasing and purchase have occurred, but the effective area of the model remains the same as in 2003.

The model assumes that ownership is in a family partnership and tax has been calculated using three partners.

Table 1: The Model in Summary 2003/04

Effective area:	1,003 ha	Total stock units wintered:	6,242 su
Opening stock wintered:		Breeding cows	152 hd
Breeding ewes	3,368 hd	R1yr cattle	135 hd
Replacement ewe hoggets	853 hd	R2yr cattle	43 hd
Other sheep	530 hd	Other cattle	23 hd

Table 2: Key Parameters

	2000/01	2001/02	2002/03	2003/04	2004/05f
Effective area (ha)	1,003	1,003	1,003	1,003	1,003
Opening sheep stock units	4,184	4,159	4,423	4,341	4,616
Opening cattle stock units	1,704	1,679	1,610	1,774	1,690
Opening total stock units	5,888	5,837	6,224	6,242	6,461
Stocking rate (su/ha)	5.9	5.8	6.3	6.2	6.4
Lambing %	110	103	110	111	117
Average lamb price ($/hd)	53.50	65.40	53.90	55.50	56.20
Average wool price ($/kg)	3.32	4.07	4.08	3.71	3.73
Total wool produced (kg)	19,928	18,632	21,337	19,812	20,877
Wool (kg/ssu)	4.8	4.5	4.8	4.56	4.52
Average R2yr steer ($/hd)	787	932	854	655	715
Average cull cow ($/hd)	595	605	433	380	426
Gross farm revenue ($)	366,000	350,000	372,300	361,598	410,973
Cash farm surplus ($)	139,000	120,800	116,240	103,952	147,126
Net trading profit ($)	119,200	145,300	117,140	95,634	155,137

Key Points

August and early September provided settled early lambing weather but significant rainfall and snow events occurred in late September, resulting in high lamb mortality and reduced pasture growth rates.
Mid December to late January saw a concentrated period of hot dry north-west winds. As a result, many farmers were forced to sell more store lambs than they had anticipated.
Gross farm revenue declined from $372,000 in 2002/03 to $361,000 in 2003/04.
Cash farm expenditure was $217,500 in 2003/04, an increase of $7,000 (+3%) over 2002/03.
Gross farm revenue is projected to increase in 2004/05 by $49,000 (14%) to $411,000 ($410/ha or $63.61/su). Almost 50% of the increased gross profit is from budgeted improvements in on-farm performance, while the other half is due to an increase of 219 stock units.
Improved returns in this model have seen farmers invest in their property to increase productivity. A number of approaches are being taken, ranging from additional capital fertiliser and subdivision, to investigation and investment into small irrigation schemes.
Use of nitrogen-containing fertiliser is increasing in this class of country, usually in conjunction with maintenance phosphate and sulphur applications.

Physical Factors

A mild and long autumn in 2003 preceded a mild winter over most of the region.

August and early September provided settled early lambing weather, but significant rainfall and snow events occurred in late September, resulting in high lamb mortality and reduced pasture growth rates. Average lambing percentage was 111%, up 1% on the 2002/03 year.

The cool temperatures and overcast weather had ramifications in October, with below average pasture growth rates, which flowed right through the spring and summer. Tight feed supplies during the early lactation of both ewes and cows reduced their seasonal milk supply peak, resulting in lighter lambs and calves at weaning.

Further to the slow October pasture growth rates, less feed was available to conserve into hay, silage or balage. Carryover supplements from the previous year proved to be extremely valuable later in the dry summer.

Mid December to late January saw a concentrated period of hot dry north-west winds which affected the entire east coast area from Marlborough to South Canterbury, and hit hardest during lamb weaning. As a result, many farmers were forced to sell more store lambs than they had anticipated on a market which fell rapidly from $1.80/kg liveweight (kgLW) to $1.30/kgLW within a 2 week period. Despite this, the percentage of lambs sold store continued to fall to 39% of all lambs sold, as farmers in this class continue to follow a trend of selling more lambs prime at higher prices.

The spring and autumn north-west winds in 2003/04 did not generally provide additional rain to the foothills farmers, who traditionally receive precipitation with these winds. This was more pronounced in South Canterbury and Marlborough than in North Canterbury.

Stock water was stretched to the limit in the hot summer conditions, with many stock water reticulation systems unable to keep up with demand. This particularly affected lactating cows, with farmers commenting on reduced milk production.

The onset of autumn rains started sooner than usual, in early February. Although some rain fell over the entire model area, not enough was received in South Canterbury and Marlborough to significantly boost feed supplies. By comparison, North Canterbury received frequent showers which continued to keep pastures growing until mating.

Although Central and Mid Canterbury received sufficient rain for a good initial lift, there was only enough follow-up rain to keep pasture relatively green, but without significant growth.

Although many ewes lost weight post weaning due to the hot dry conditions, most managed to regain that weight through the additional pasture growth and supplementary feed over the late summer and autumn. Many farmers fed silage/balage and/or grain over this period to keep up the energy intake of ewes.

The tight spring feed conditions, followed by the mid summer dry, had a significant impact on calf weaning weight, with many farmers commenting that weights at weaning were 15-25 kgLW below normal.

Weaner deer fared no better, with reports of weaning weights down 2-3 kgLW from previous seasons (at the same weaning date). Farmers had two options with weaning. Either they weaned earlier than normal (selling weaners at lighter weights) to protect hind condition for mating, or they post rut weaned in the hope that the extra fawn weight would compensate for potentially poorer hind fawning the next year.

Few early lambing ewes had been scanned at the time of writing, but expectations are that potential lambing in spring 2004 is above last season's level.

Of concern are early indications in the cow herd of potentially over twice the normal 5-8% dry cow rate. This is not totally unexpected due to the very tight feed conditions that existed when the cows were being mated.

Financial Factors

2003/04 Review

Revenue

Gross farm revenue declined from $372,000 in 2002/03 to $361,000 in 2003/04. Stock numbers remain static between 2002/03 and 2003/04, but an additional 219 su were retained during 2003/04. Gross revenue per stock unit fell by $1.90/su to an average of $57.93/su in 2003/04.

Sheep meat and wool generated 71% of the gross farm revenue for the property from 70% of the stock units. Sheep meat sales generated 51% of gross farm revenue with cattle sale, wool, deer and grazing sales generating 26%, 20%, 1% and 1% respectively.

The average lamb price was $55.54/hd, up by $1.64 from 2002/2003. Sixty-one percent of the lambs were sold prime at $61.29/hd, with store lambs returning $46.25/hd. There has been a steady increase in the number of lambs sold prime over recent seasons (50% in 2002/03) and this trend is projected to continue into 2004/05.

Wool production dropped slightly to 4.6 kg/ssu in 2003/04 from 4.8 kg/ssu in 2002/03. This is largely due to shearing fewer lambs, and to the bad weather. The average greasy wool price dropped from $4.08/kg in 2002/03 to $3.71/kg in 2003/04, a 9% fall. A wide range in wool returns from $2.87-$5.93/kg reflects the variability of both fibre microns and the wool market over the selling season.

The increasing influence of the crossbred clip into this sector is also reducing the wool price. This strengthening of the wool clip is projected to continue, as farmers introduce crossbred rams into their breeding programmes to produce replacement ewes.

Combined sheep and wool returns decreased from $66.90/ssu in 2002/03 to $59.09/ssu in the 2003/04 season (-12%).

Calving percentage showed a slight lift to 93% in 2003/04, and steer calf prices increased by $28/hd to $434/hd, but prime cattle values dropped significantly. The average R2yr steer sold for $854 in 2002/03 and for $655 in 2003/04 (down 23%). The small increase in the calf sale price understates the lift in the market from 2002/03 as the calves were sold 15-25 kgLW lighter in 2003/04.

Seventy eight percent of the value of cattle sales is contributed from the sale of adult cattle (forward store or prime).

Cattle represent 29% of the stock units on the property and have increased by 164 csu from 2002/03 to 2003/04. Average cow numbers have increased by 11, with the balance of the additional stock units made up from finishing stock classes.

Deer farming is a small contributor of revenue in the model, providing about 1% of the total stock units for the property.

The sale price for mixed-sex R1yr weaners dropped by 49% to $78/hd in 2003/04, from $152/hd in 2002/03.

Table 3: Cash Farm Revenue ($)

	Actual 2001/02	Actual 2002/03	Estimate 2003/04	Forecast 2004/05
Sheep sales less purchases	184,500	209,000	182,940	234,453
Cattle sales less purchases	80,700	66,000	94,602	88,925
Wool	75,800	86,900	73,580	77,767
Other income	8,800	10,400	3,862	2,458
Gross farm revenue	349,800	372,300	361,598	410,973

Expenditure

Cash farm expenditure was $217,500 in 2003/04, up by $7,000 (3%) over 2002/03.

Cash farm expenditure consumed 60% of gross farm revenue compared with 56.5% in 2002/03, continuing a rise from 53% in 2001/02.

Wages and ACC have increased by $4,640 (16%) during the 2003/04 year, due mainly to an increase in staff pay rates to maintain competitiveness with alternative employment options.

Feed expenses increased by $3,000 (17%) due to additional supplements being purchased over the summer dry of 2003/04.

Although fertiliser expenditure decreased slightly (by $1,000), this reduction was more than compensated for by an increase in lime applied ($1,890). There has been a significant increase in the amount of nitrogenous fertiliser applied in this model. Industry statistics indicate a decline in superphosphate application, but an increase in high analysis fertiliser containing nitrogen (up approximately 15%).

Regrassing costs reduced by almost 60% from $5,600 in the 2002/03 season. In part, this related to the dry conditions experienced in the summer of 2003/04 as farmers chose not to sow down as much new pasture.

Vehicle expenses increased only slightly by $640 from $17,050 in 2002/03. However, fuel increased by $1,300 (17%) while repairs fell by $665 (or 7%). The reduction in repairs is mostly due to the vehicle replacement programmes that have been undertaken over the previous two seasons.

Rates have increased by 26%, or $1,460, as land values increase and district councils set new rating levels.

Net Result

The cash farm surplus generated for 2003/04 is $104,000, which is down $12,300 (11%) on 2002/03. This sum was used for personal drawings ($42,800, up 3%), taxation ($23,474, down 28%), principal repayments, capital purchases and development.

Funds were allocated to principal repayments of $19,000 (same as previous year), development $16,000 (down $4,000 from the previous year) and capital replacement $15,000 (down $8,000 from the previous year).

Canterbury/Marlborough Hill Country Profitability Trends

2004/05 Forecast

Revenue

Gross revenue is projected to increase in 2004/05 by $49,000 (14%) to $411,000 ($410/ha or $63.61/su). Almost 50% of the increased gross profit is from budgeted improvement in the performance on farm, while the other half is due to an increase in stock numbers of 219.

Sheep are projected to contribute 76% of gross profit (71% of stock units) with cattle adding a further 22%. Gross profit from sheep and wool is projected to be $67.64/ssu (up $8.55, or 11%).

With favourable ewe mating conditions for most farmers over autumn 2004, lambing is anticipated to rise by 6% to 117%. Lamb prices are expected to increase slightly by about $0.66/hd, reflecting the continued increase in sale of prime lambs.

Cattle stock units and net revenue are projected to fall slightly, down 4.7% and 6% respectively. Calving is anticipated to be down slightly (1%) due to harsh mating conditions in 2003.

The sale price for R1yr steers (as calves) is expected to increase to $492/hd (up $58/hd), and prime R2yr steers to $715/hd (up $60/hd).

Expenditure

Cash farm expenditure is expected to rise by 3% to $224,000. The cash farm expenditure is forecast to consume 54% of gross profit.

Farmers expect to rebuild their supplementary feed reserves and have budgeted for an increase in expenditure for hay and silage, but less on barley, resulting in an overall decrease of $1,700 (-8%).

Fertiliser expenditure is projected to increase in the 2004/05 season by 16% to $37,200, or $5.75/su.

Like permanent wages, shearing wages are projected to hold, at $4.26/su and $4.76/su respectively.

Current rises in fuel prices are reflected in the anticipated increase in vehicle expenses (up $1,200, or 13%).

Repairs and maintenance expenditure (non-vehicle) is anticipated to rise by 4%. Expenditure in this area is often viewed as discretionary, and with the projected improvement in profitability for 2004/05, a few extra maintenance jobs are budgeted to be completed.

Net Result

The cash farm surplus is projected to be $147,000 in 2004/05, up $43,200 (41%) over 2003/04.

It is anticipated this net trading profit will be used for drawings $42,700 (holding to 2003/04), taxation $23,500 (holding 2003/04), principal repayment $25,700 (up $6,500), development $6,000 (down $10,000) and capital purchases $8,000 (down $7,000).

Issues and Trends

Improved returns over the last 2 years in this model have seen farmers invest in their property to improve productivity. A number of approaches have been taken, ranging from additional capital fertiliser and subdivision, to investigation and investment into small irrigation schemes.

The shift in emphasis of this group towards greater lamb production with less reliance on wool has encouraged many farmers to experiment with different dual-purpose sires.

From a Corriedale and half-bred base flock, farmers have used generally stronger wool rams (Romney type) on a portion of the flock. This will eventually have an impact on the quantity of mid micron wool produced as the female progeny enter the flock. It may be up to 5 years before the full impact of this is felt. Although many farmers have taken the cross breeding option on board, they are still not clear on their final ewe flock genetic composition.

The cow herd is increasing slightly and most hill country farmers are now calving their maiden heifers as 2-year-olds. This has required implementation of specific feed management techniques to ensure these first calvers get back into calf in the next season. Calving percentage is improving slowly as farmers gain expertise in heifer mating.

Some farmers are moving back to traditional beef type cows, away from the higher lactation beef cross cows, to improve the saleability of calves.

Deer farmers have become strongly focused on returns from their herds due to the second consecutive season of low weaner prices. Many farmers, who had been increasing the breeding herd size, have either not retained replacements or have culled older hinds very heavily.

The model average deer stock units increased during 2003/04 by 40 su from opening 49 su. A wide range of farmer responses are noted. Some farmers are maintaining hind numbers while others are reducing. There is some indication that hind numbers are falling slightly and being replaced with sheep and cattle stock units to help strengthen overall property viability.

Farmers are prepared to move other stock classes into the "deer unit" to eat the feed if insufficient deer are available within the unit.

Use of nitrogen containing fertiliser is increasing in this class of country, usually in conjunction with maintenance phosphate and sulphur applications. The nitrogen is being used strategically on parts of the farm to boost generally autumn growth, but also early spring feed supply in some instances. The application rates are typically 10-30 kg/ha of nitrogen (20-60 kg/ha urea equivalent).

Much of the stimulus for the nitrogen application has come from recent research indicating improved profitability and demonstrating lower levels of nitrogen fixation from clovers, particularly on the dry hill faces. Even sub clover on very dry faces has often not provided adequate nitrogen to optimise potential pasture production.

Concern exists over the disparity between the North Island and South Island sheep and beef schedules throughout the season. Farmers cannot understand why this disparity has occurred.

As a result of the dry summer and higher schedules in the North Island, considerable movement of store stock to the North Island has occurred (some prime also) for both sheep and cattle. It is estimated that 780,000 lambs moved to the North Island during January. These are stock that would have traditionally been finished on South Island finishing units and killed in the South Island. Undoubtedly this has an impact on the total agriculture servicing sector throughout the South Island.

Many farmers represented in this model are still investigating irrigation opportunities on their properties, often with on-farm gully storage, to irrigate relatively small areas (20-50 ha) to be used intensively. Some are even considering intensive land use outside of traditional pastoral agriculture, e.g., viticulture and horticulture.

There is continuing pasture development on these properties through further intensification of subdivision. Redevelopment of the better rolling down country with herbicides and direct drilling is continuing.

Matagouri spraying, followed by burning and over-sowing, has become a popular development process for this group of farmers in improving productivity of good hill country.