Financial Factors
1999/2000 Review
Revenue
Gross farm revenue for 1999/2000 was calculated at $222,000, or $43.50/su. This is very similar to last year. However, stock numbers also increased by 468 su, which equates to $28,000 in value.
Sheep revenue was $48.15/ssu, including increases in stock numbers. Cattle revenue was $46.27/csu, including increases in stock numbers.
The average lamb price for 1999/2000 was $39.30/hd excluding 1998/99 pool payments. This was up $11.07 on the 1998/99 lamb price of $28.23/hd. Unlike last year, the schedule for lambs remained firm throughout the season and increased in the later part of the autumn. Some lambs were sold store at $1.10/kg liveweight prior to Christmas, mainly due to fear of drought.
Cattle prices were considerably better than expected. The average calf price this year was $359 for heifers and $412 for steer calves. This represents a huge $200/hd improvement on last year.
Wool prices averaged $3.10/kg. The wool within this model is a mixture of halfbred and fine crossbred. The wool price was $3.05/kg last year. For most farmers in this model wool is a distant secondary earner compared to meat.
Other farm revenue represents $5,350, or $1.05/su.
Off-farm income was $2,200 and $4,500 of outside capital was introduced to the farming business. Some of this represented the last of the AMP shares being cashed in.
Expenditure
Farm working expenses were $132,000, or $25.80/su exclusive of interest. This represents 60% of gross farm revenue. Farm working expenditure last year was $136,000, or $23.13/su, based on opening stock units of 5,888.
Fertiliser expenditure, including lime, was $21,700, or $4.25/su. This represents close to full maintenance expenditure on fertiliser.
Feed costs were considerably lower than last year, at $1.94/su. Last year they were $2.64/su. While more was budgeted for spending on feed this year, dry conditions throughout spring 1999 resulted in only limited amounts of supplements being harvested in 1999/2000. Most silage pits and hay barns were 75% full. There was very little off-farm grazing required this season.
Farmers in this model continue to be cautious with farm expenditure until genuine cash surpluses can be generated. Reinvestment in terms of capital development is very limited.
Debt servicing is $37,225, or $7.28/su. This represents 17% of gross farm revenue. Total debt loading for this farm model is $422,000, or $82/su. The level of debt loading per stock unit has increased considerably over the last two years due to restocking costs. Last year started at an average debt loading of $74/su.
This year the average property repaid $5,600 of principal. At this level of repayment, it would take 25 years to repay the term loan.
Cash drawings were $32,700 for the average property.
Capital purchases were $10,700 and in most cases represented the replacement of a motorbike.
Net Result
The model farm recorded a cash surplus of $5,900. This is the first time this model has recorded a cash surplus in the last three years. Additionally stock numbers have been rebuilt with an increase in value of $28,000.
Combining the principal repaid, the cash surplus and the increase in livestock values, the average farm in this model has achieved an overall financial improvement in net position of $38,800 for the 1999/2000 year. Net trading profit increased from -$27,989 last year to $66,264 this year.
2000/01 Forecast
Revenue
Total gross farm revenue is budgeted to increase to $278,000 or $49.90/su. Additionally, stock units are forecast to increase by 103, representing a further $9,600 in foregone revenue. Overall gross farm revenue, including increases in stock units, is expected to be $51.65/su. This represents a $28,000 improvement over the 1999/2000 year.
Lambing
percentage is expected to increase to 120% survival to sale. This is due to the
overall improvement in ewe mating liveweights of 5 kg/hd compared to last season, and a
continuing management emphasis aimed at improving per head performance levels. The average
lamb price has been budgeted at the same level as the 1999/2000 season, at $39.30/hd.
This coming year only a small number of ewes will be bought in. They will be purchased to gradually change the breed on some properties within this farming class from halfbred to perendale. It is not expected that the bought-in ewes will increase stock numbers.
Wool prices are expected to increase by 30 cents to $3.40/kg. Already guarantees of this price to several farmers in this model have been assured through contracts. Farmers within the model had budgeted next year's wool price at $3.10/kg, but industry sources believed that this was too conservative. The average wool price has been set at $3.40/kg to better reflect recent improvements in the price of wool.
Kilograms of wool sold are forecast to increase 2,972 kg to 22,790 kg, due to an increase in sheep numbers and ewes clipping 0.25 kg/hd more wool to average 4.75 kg/hd. Wool revenue is expected to increase from $61,500 to $77,500, or from $14/ssu to $16/ssu. Sheep revenue is expected to be $51.70/ssu.
Other farm revenue amounts to $3,300, or 60 cents/su.
Off-farm revenue is expected to be $2,100. There is no expectation of the need for new borrowings.
Expenditure
Cash farm expenditure is forecast to increase by $15,500 to $147,000, or $26.40/su exclusive of interest. Farm working expenses represent 53% of gross farm income.
The main increases in expenses are for shearing to increase by $4,200 (or 14%), animal health by $3,000, labour by $1,500, and fuel by $1,000.
Fertiliser is expected to increase from $22,000 to $28,000, or $5.00/su including lime. This will represent full maintenance fertiliser expenditure.
Animal health expenditure is expected to increase over the 1999/2000 year due to more farmers in this model using drench capsules. At $14,400, animal health costs $2.50/su.
There is an expectation by farmers that more labour will be employed on this property this coming season as the financial position improves. The overall management system on this class of property is intensifying.
Capital expenditure is expected to decrease from $10,000 to $7,500.
Drawings are forecast to go up from $32,700 to $35,500. Increases in education costs are becoming apparent in this model as more schools close.
Debt servicing is slightly higher than last year at $39,000 compared to $36,000. The reason for this is an expected increase of approximately 1% in interest rates. Principal repaid is expected to be $11,400, which is $5,500 higher than last year.
Taxation is expected to increase from $5,545 to $12,400 for the coming year. Industry commentators believe next year's tax payable may be under-estimated by up to $7,000.
Net Result
The model farm is expecting a cash surplus of $27,700 in 2000/2001. Additionally, stock numbers are expected to increase in value by $9,600.
Combining the cash surplus, the increase in livestock numbers and principal repayments, the overall result will be an improvement in financial position of $48,200.
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Farm Monitoring Programme Manager
Monitoring and Evaluation
MAF Policy
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
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