Financial Factors
1999/2000 Review
Revenue
Gross farm revenue received in the 1999/2000 year increased by $26,712 (27%) over the 1998/99 year and even by $10,613 (9%) over the May 1999 forecast. Cattle accounted for 83% ($22,198) of the increase, and sheep 17% ($4,783). Schedule beef prices for 1999/2000 were on average 50 cents/kg higher than for the 1998/99 year. Shortage of stock and an abundance of feed in November and December resulted in store prices being above or equivalent to schedule prices. Some farmers took advantage of this and sold cattle earlier than normal.
Sheep revenues have also increased by $4,783 between the 1998/99 and 1999/2000 seasons. This is almost entirely due to an increase in average lamb revenues. Better lamb survival provided an extra 30 lambs for slaughter, and average lamb weights were 1 kg/hd heavier than the previous season. The average lamb price rose from $35.05 in 1998/99 to $43.10/hd in the 1999/2000 season.
Wool income showed little change between years, continuing to stagnate at around $2.15/kg greasy.
Expenditure
Farm working expenses increased by $11,632 (17%). Half of that increase was additional spending on repairs and maintenance (up 90%), and fertiliser and lime (up 70%).
Repairs and maintenance expenditure went into improvements to races, water supplies, fencing, yards and buildings. The additional fertiliser expenditure was spent largely on lime applications, with some increase in phosphatic fertilisers. Fertiliser rates in the 1998/99 season were at roughly 50-55% maintenance. In the 1999/2000 year this increases to around 75% maintenance. Twenty percent of the monitored farms were still not using any fertiliser.
Reduced interest rates resulted in a decrease of nearly $1,800 in interest expenditure between the 1998/99 and 1999/2000 years.
Provisional income tax payable in 1999/2000 is calculated on the relatively low taxable income of the 1998/99 year rate. This means a terminal tax payment of $3,375 will be due for payment in the next financial year.
Net Result
For the first time for six years the model sheep and beef farm produces a disposable surplus in its own right. The 1999/2000 surplus before off-farm earnings are taken into account is around $13,000. This compares to the 1998/99 year when the property just broke even. The 1998/99 Northland sheep and beef model was only able to produce a cash surplus because off-farm earnings of $8,000 were included. A cash surplus of over $21,000 was produced in the 1999/2000 year.
2000/01 Forecast
Revenue
The 2000/01 forecast shows gross farm revenue is expected to increase by $10,871 (9%) above the 1999/2000 year. Of this increase, $9,864 (91%) is from beef cattle and $1,008 from sheep sales.
Numbers of cattle forecast to be sold in 2000/01 increase by 2% when compared to the 1999/2000 year, but the biggest effect is the forecast 9% increase in average per head cattle price from $608/hd in 1999/2000 to $661/hd forecast for 2000/01. Although store cattle prices are expected to increase, farmers believe the margin between purchase and sale prices will be maintained.
Farmers expect the spring 2000 lambing percentage to improve by 2% to 110% because of the lower incidence of facial eczema during the 2000 autumn. The average lamb price is forecast to be $3/hd higher than in 1999/2000. Monitored farmers were not prepared to forecast an increase in the wool price in spite of industry sources suggesting 40 cents/kg greasy wool would be reasonable to expect.
Expenditure
Cash farm expenditure is forecast to rise by $6,637 (8%) in the 2000/01 season. The major items that contribute to this increase are additional fertiliser ($3,650), repairs and maintenance ($700), and interest ($1,485). The remainder is made up of general increases in items such as rates, fuel, and animal health.
Expenditure on lime has continued at the 1999/2000 level. Many farmers have not applied lime for five to six years and realise that low pH levels are limiting the response to phosphatic fertilisers.
The largest increase is in tax payments, from $4,730 in 1999/2000 to $11,846 in 2000/01. Of this, $3,375 is terminal tax from the previous year. Provisional tax, based on the previous year's income, will also increase markedly.
Personal drawings are expected to increase by $2,000 to $21,000 during the 2000/01 year.
The forecast also indicates a modest increase of $3,000 in capital expenditure for the coming year.
Net Result
Net cash change reduces from $21,248 in 1999/2000 to $13,871 in the 2000/01 year.
The net trading profit shows a reasonable $7,000 increase over the 1999/2000 season. A disposable surplus is still produced in the 2000/01 year, but it is 56% lower than that produced in the 1999/2000 year.
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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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