Financial Factors
1999/2000 Review
Revenue
Gross farm revenue (net of livestock purchases) increased by $220/ha compared to 1998/99. Improved lamb prices, increased stock numbers, and climatic factors all assisted.
Sheep revenue (net of livestock purchases) increased by 74%, from $150/ha in 1998/99 to $261/ha in 1999/2000. Cattle revenue (net of livestock purchases) increased by 294%, from $43/ha in 1998/99 to $126/ha in 1999/2000.
Lamb prices averaged $39.85/hd, $4.82/hd higher than forecast in 1998/99, and $3.22/hd above prices received in 1998/99.
The average wool price increased slightly from $2.43/kg in 1998/99 to $2.51/kg in 1999/2000, partially explaining the $14.80/ha increase in wool revenue. Increased wool production per sheep stock unit also contributed to this result.
The average mixed age bull price increased from $689/hd in 1998/99 to $928/head in 1999/2000. Average prices received for rising 2-year-old steers and cull cows in 1999/2000 were $858/hd and $557/hd respectively.
Expenditure
Direct comparison of cash farm expenditure between 1998/99 and 1999/2000 cannot be made due to the change in the model farm size and increased stock numbers. However, the total expenditure on a per stock unit comparative basis increased by only $0.04/su
Fertiliser was the largest cash farm expense in 1999/2000, at 13.9% of cash farm expenditure. Fertiliser expenditure increased by $2.42/su between 1998/99 and 1999/2000. Fertiliser expenditure in 1998/99 was only 8.4% of cash farm expenditure.
Interest was the second largest expense in 1999/2000, at 13.9% of cash farm expenditure, decreasing by $2.62/su since 1998/99, despite the increase in interest rates. In 1998/99 interest was the largest cash farm expense, at 21.4% of cash farm expenditure.
The other main components of cash farm expenditure were wages (11.4%), shearing (8.3%), animal health (7.9%), and repairs and maintenance (7.6%).
Net Result
The 1999/2000 cash farm surplus of $148.80/ha was a significant improvement on the previous year's result of $15/ha. The large increase resulted in a net trading profit before tax of $66,774 in 1999/2000.
Development expenses and capital purchases increased significantly.
The current account recorded an improvement of $17,106 in 1999/2000
2000/01 Forecast
Revenue
Gross farm revenue (net of livestock purchases) is forecast to increase by $17,598 (7.3%) to $259,301 in 2000/01, equating to an increase of $27.80/ha and $3.70/su.
Cattle revenue (net of purchases) is forecast to increase by 53% from $60,486 ($126.30/ha) in 1999/2000 to $92,305 ($189.50/ha) in 2000/01. The main reason for the increase is associated with an extra 31 mixed aged bulls forecast for sale in 2000/01, at an average price of $1,030 (up by $102/hd on the previous year).
Sheep revenue (net of purchases) is forecast to decrease by 10.2%, from $124,798 ($260.50/ha) in 1999/2000 to $112,093 ($230.20/ha) in 2000/01. Despite a forecast lambing percentage of 120% and a slight increase in forecast lamb price of $0.40, sheep revenue is predicted to decrease due to 410 fewer sheep being sold in 2000/01.
Wool revenue is forecast to increase by 4.8% to $45,043 due to a slight increase in price to $2.60/kg in 2000/01, and an increase in production of 0.06 kg/ssu.
Expenditure
Total expenditure is forecast to increase by 4.8% to $178,561 in 2000/01, equating to an increase of $10.82/ha and $1.72/su. Consultants and industry advisers consider that farmers have not fully accounted for cost increases associated with the low New Zealand dollar and the increase in shearing costs.
As in 1999/2000, fertiliser is the largest cash farm expense at 15.4% of
cash farm expenditure, followed by interest (14.5%), wages (8.3%), shearing (7.9%), animal
health (7.7%), and repairs and maintenance (5.9%).
Interest is forecast to increase by $0.46/su due to the rise in interest rates.
Development and capital purchases are expected to decrease in 2000/01 by $2,484 and $6,046 respectively, indicating that farmers took advantage of good returns in 1999/2000 and caught up on development during the year. Consultants and advisers suggest that farmers budget conservatively when it comes to development and capital purchases, recommending that they wait for the realisation of high returns before allocating money to development and capital purchases.
Large taxable incomes were generated in 1999/2000 upon which higher provisional tax payments will be based. Due to lower levels of provisional tax being paid in 1999/2000, many farmers will pay a lot more terminal tax in 2000/01. MAF calculated the tax due in 2000/01, based on the 1999/2000 year taxable income plus 10%, as $19,728 (inclusive of 1999/2000 terminal tax). Farmers surveyed expect to pay $19,320, so appear to have adequately budgeted for increased tax due in 2000/01.
Net Result
Cash farm surplus for 2000/01 is forecast at $80,740, up 13.3% on the 1999/2000 surplus, as a result of increased cattle revenue and farm size. However, taxation of $19,728, along with depreciation and livestock value adjustments, will reduce the net trading profit after tax to $64,070.
Economic farm surplus increased by 37% to $77,361 ($158.85/ha) in 2000/01. The ratio of economic farm surplus to total farm capital is calculated to be 5% in 2000/01, and is a satisfactory level of profitability.
| © MAF 2000 |  |
|
| MAFnet Help | Important Disclaimer |
Contact for Enquiries
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
Contact this person
