Sector Overview
Seasonally this year is being described as the best for 20 years, almost nation-wide, with a milder than expected June to further assist pasture production and stock weight gains. Farmer morale and confidence are very high, after "eight years in the wilderness". Profitability levels for 1999/2000 have exceeded earlier farmer expectations, with the best farms achieving a 10% return or better on total farm capital.
In most areas (except parts of the Waikato) rain fell when it was needed through the summer. Many farmers admit they could have carried more stock. Store stock prices reached speculative levels. A lot of hay and silage was made. and the national average lamb weight is predicted to reach a record 16.5 kg.
There is a trend towards carrying inure finishing stock in preference to breeding stock. This in turn creates opportunities for the dairy industry to supply bull calves to the sheep and beef sector.
Farmers are increasingly using new mixes of sheep breeds, with east fresian and firm being popular. Composite rams are also being used more. A stabilised quarterbred east fresian or finn sheep flock is increasingly used.
More fly strike and fungal disease problems are causing concern, as is the labour required in controlling outbreaks. The 1999/2000 season saw significant facial eczema aftermath impacts, and in Southland Salmonella bradenburg impacts were severe on affected properties.
More farmers are using egg counting kits to establish internal worm burdens. Farmers are concerned about drench resistance.
A good lambing in 2000 is expected as sheep were in good condition when going to the ram, and a mild winter is anticipated.
The spread of clover weevil is causing concern in northern areas. Farmers who have it on their properties are having to use more nitrogen fertiliser.
Tile establishment of the varroa mite could have significant medium term impacts on clover viability in the sward.
The survey of farmers showed that the average number of kilometres travelled annually is a very high 33,000.
Monitored farms show a sharp improvement in profitability over recent years.
The mix of farms used in the survey has changed, meaning direct comparisons are not possible, but the trend is for significantly increased cash farm surpluses.
The main reasons are the excellent growing season and the weak New Zealand dollar, rather than a big upward movement in overseas market returns.
Beef prices were up approximately 50 cents/kg in 1999/2000 compared to the previous year.
Merino farmers and those on moist hill country in Hawkes Bay and the Wairarapa had the best years of the farm models. Many achieved a greater than 10% return on total farm capital.
Anticipating the much better farm gate production and returns, farmers spent more on repairs and maintenance and fertiliser, and reduced their bank overdrafts. More capital items such as ATVs and cars were purchased.
The gap between the best and the worst farms' financial performance continues to widen. The top 10-15% of farmers are leading the rest and are generally keen to expand their farming operations, often by leasing additional land. Successful farmers are proactive in seeking advice and knowledge in their quest to increase the quality and quantity of farm outputs.
Farm input costs of fertiliser, capital puchases, shearing and local services are expected to increase, particularly if there is an imported component. Many farmers feel that wage rates will have to increase to attract farm staff.
Most-farmers should budget on having to pay significantly more tax next year based on provisional assessments of this year's income.
Despite the improvement in profitability, farmers and valuers thought that higher stock values and the lack of purchases for forestry will keep land price increases in check. New farm entrants look at the total cost of going farming, not just the price of land and buildings.
Many large farms under good management are providing work satisfaction and a good livelihood for farming family owners.
Farmers are annoyed at government changes to ACC and the reinstatement of the Employment Relations Bill, which they see as a backward step.
Concern is being expressed within the industry that the Employment Relations Bill may lead to more frequent strikes at export meat plants, resulting in a permanent loss of major overseas contracts for chilled meat products.
Meat companies have high operating costs and small profit margins. Any policy or action by government that increases company costs is of concern to farmers. The seasonal nature of meat processing and the additional costs this imposes is something which needs further investigation to establish the viability of spreading the season.
The McKinsey report recommendations for the wool industry are significant, especially McKinsey's suggestion that the recommendations be accepted in total as a package or not at all.
Farmers currently appreciate that the current low NZ dollar is greatly assisting export receipts. Curiously, in contrast to bankers and economic commentators, they do not think the New Zealand dollar will appreciate much in the medium term.
Faxes, mobile phones, farming software, and the Internet all mean that farmers are able to more efficiently run their businesses.
Issues such as roading, telecommunication services, and access to other services all feature in discussions, but not as prominently now that farm profitability is restored.
Farmers are anxious that government addresses the time and costs of doing business, including compliance and RMA costs and delays.
Many farmers believe that inadequate and misdirected research is being under-taken. They see farming as the one bright spot in an otherwise lacklustre economy, and believe New Zealand should build on its strengths and competitive advantage in the primary production sector.
Farmers are concerned about the recent lapses in biosecurity and the additional risks these impose. The long term viability of organic farming is questioned, both from an on-farm and marketing perspective.
Farmers are surprised that scientists cannot provide any evidence that organic foods are nutritionally different. They say that "New Zealand, by European organic standards, is very nearly organic anyway". Many feel that MAF should be countering the "green" lobby with sound science.
Global warming impacts are of concern, and farmers are not sure why the New Zealand Government has not ratified the Kyoto Protocol.
The acute lack of young people willing to enter farming is of concern. Farm training institutes are struggling, and agricultural student numbers at universities are well down. This is considered to be short-sighted of young people, as there are, and will be, inure excellent well-paid career opportunities managing large farms.
National Sheep and Beef Farms All Class Averages |
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| 1996/97 | 1997/98 | 1998/99 | 1999/2000e | 2000/01f | |
| Gross Farm Revenue | 173,000 | 182,000 | 171,000 | 277,000 | 300,000 |
| Cash Farm Expenditure | 99,000 | 105,000 | 101,000 | 162,000 | 167 000 |
| Cash Farm Surplus | 74,000 | 77,000 | 70,000 | 114,000 | 133,000 |
| © MAF 2000 |  |
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Farm Monitoring Programme Manager
Monitoring and Evaluation
MAF Policy
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
Fax: +64 4 894 0741
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