Issues and Trends
Farmer morale has lifted considerably in the past six months. Increased rainfall and stock prices have improved incomes and given hope for the future.
Farmers are managing more stock per labour unit than in the past. The use of contractors for agricultural work has freed up both labour and the capital required for machinery replacement. Sheep pregnancy scanning and the use of conveyor stock handling systems for drenching/tagging/vaccinating have allowed farmers to run increased stock per labour unit.
A significant number of families in this farm class have been receiving family assistance over the last two years. Eligibility for this will become less likely as income levels increase over the next year.
The average farm in this model runs 6,300 su in a "normal" year. At June 1999 they had 5,100 su. Rebuilding stock numbers is a priority, but farmers are not willing to drop per head production to achieve this. A cautious approach is being taken to rebuilding stock numbers this coming season.
The drought has cost this model close to $100,000 over the past three years. Many farmers are questioning the long-term financial viability of their farms. In part this has been reflected in a decline in numbers of mid-micron woolled sheep (halfbreeds and corriedales). Farmers have changed to either merino, for wool production, or stronger woolled perendales and romneys, for lamb production. Farmers are tending to specialise more rather than diversify.
Land sales have occurred throughout the area, in contrast to the previous year when land sales were slow. Land and buildings have been selling for between $140 and $210/su, depending on the level of improvements and location. Some new farmers have moved into the area, partly in response to lower land values than elsewhere in the South Island.
Freeholding of any Crown leasehold land continues to be an issue for some farmers in this model, with little resolved to date.
Financiers appear happier this year than last as farmers show better cashflows and financial results. The recent rise in interest rates is of concern, but many farmers have locked in loans at levels below 10%.
Two primary schools with rolls of less than ten have closed over the past year in the Otago dry hill area.
The Otago Regional Council is embarking on a programme of soil and climate mapping throughout Otago. Over time this mapping programme may present some other commercial land use opportunities for farmers in Otago. However, diversification into intensive land uses is relatively limited for the majority of farmers in this farm class.
The incidence of Tb has been progressively falling over the last three years for inland Otago properties. Reasons for this include an increased awareness of the key issues contributing to Tb infection and more effective vector control strategies. Tb movement regulations are expected to tighten up further for cattle herds with the new proposed Animal Health Board Strategy.
A significant amount of farm business restructuring is occurring with the abolition of stamp duty. This has led to the formation of a large number of farming companies and family trusts. These are being set up to enable a smoother transition for farm succession, protection of assets, and for tax planning purposes.
Accountants are advising farmers to maximise taxable income for the 1999/2000 year so as to reduce next year's taxable income below $60,000 and avoid the 39% tax rate.
| © 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
