Financial Factors
1999/2000 Review
Revenue
Gross farm revenue was $296,114, or $52.71/su. This is the highest gross farm revenue for several years and was a result of a good production season coinciding with increased returns for lamb and especially cattle.
The average lamb price of $42.14 is 19% better than the 1998/99 season. As the lambing percentage increases on these properties, a number are selling a proportion of lambs as stores. Some properties in this model are specialising in selling all of their lambs on the farm.
The lamb schedule this year did not drop off in the autumn as it has in previous seasons, and this suited these properties.
Wool revenue made up 20% of gross farm revenue. Production (4.76 kg/su) and prices were as budgeted. There was a change in shearing patterns to more winter and pre-lamb shearing in an attempt to keep wool quality up, workload spread and shearing costs down.
Cattle revenue made up 11% of gross farm revenue and was up 35% on the previous year. More calves have been retained to finish and cattle have been purchased to trade. Calf prices averaged $433/hd. The interest in calves came from outside the region and even the North Island.
Other farm revenue of $11,715 came from pool payments and rebates.
Off-farm income of $8,524 came from investment income and a small amount of off-farm employment.
Expenditure
Cash farm expenditure (excluding interest and rent) was $165,519, or $29.46/su. This accounts for 56% of gross farm revenue. Expenditure was up slightly (5%) on 1998/99. Cash farm expenditure, including interest, was $36.54/su.
Feed costs were higher than the 1998/99 season due to the drought, some carryover of grazing costs, and higher than normal amounts of feed that were conserved. Hay and silage contractors were particularly busy this summer.
Full maintenance fertiliser went on and larger amounts of lime were also used.
Animal health costs continue to rise as farmers strive to get production increases. Vaccinations against abortion and colstridial disease, vitamin supplements and anthelmintic use are being scrutinised to see where the best return will be.
More principal was repaid and significantly more (71%) was spent on capital purchases than in 1998/99. Depreciation was $20,056.
Debt servicing was $7.08/su and made up 13% of gross farm revenue. As this model has a fixed rate mortgage and improved its current account balance, debt servicing remained similar to the previous year even though interest rates rose.
The stock value change was $11,214. This was due to an increase of 112 su, mainly cattle.
Net Result
Cash farm surplus was $90,837 or $16.17/su. This was a significant increase on the 1998/99 season and the best result for a number of years. After drawings, tax, principal, capital purchases and development were deducted, the disposable surplus was $11,635.
After off-farm income is included, the net cash change for the year was $20,149. This was down on budget but more principal was repaid and more capital items were purchased. This result has lifted farmer morale after some difficult years.
2000/2001 Forecast
Revenue
Gross farm revenue is budgeted at $ 331,488, or $57.85/su. This is a 10% increase on the 1999/2000 season. Farmers are confident of their feed situations and ability to get another good lambing percentage. Market signals indicate that meat and fibre prices will be as good as, if not better than, the 1999/2000 season.
Sheep stock units are up slightly (1%). Lambing percentage is budgeted at
128% for mixed age ewes and 35% from the hoggets. Average lamb price is up $1.10 to
$43.24/hd. Cull ewe price is budgeted to be similar to the 1999/2000 season.
Cattle prices are back slightly but as more and older steers are coming on-stream the return per cattle stock unit has increased. Total numbers of cattle have increased by 9%.
Wool price is expected to go up 4% to $2.76/kg. Farmers were interviewed prior to the late season lift in crossbred wool auction prices.
Industry commentators suggest that the gross farm revenue may not be as good as farmers anticipate. Reasons for this include the performance of overseas economies, the exchange rate and markets in general.
Expenditure
Cash farm expenditure, at $209,528 (including interest and rent), is also up, but only by 3%. Key areas for increases are fertiliser, lime, and shearing costs. Areas where less is planned to be spent are feed and some administration costs. Cash farm expenditure (excluding interest and rent) as a percentage of gross farm revenue is 52%.
Tax has increased to $21,100. However, this may be an under-estimation of tax liability, as some farmers have not been paying much provisional tax.
Capital expenditure and drawings are also budgeted to drop. Previous years show that these two categories often rise when a healthy surplus is produced.
Net Result
Cash farm surplus is forecast to be $121,960 or $21.28/su. This is a significant increase on the previous season and the third year of increasing results. After tax, drawings, principal, capital purchases and development are deducted, the disposable surplus is forecast to be $41,024.
After off-farm income is included, the net cash change for the year was $46,716.
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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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