Farm expenditure and inflation expected to impact farm profit margins
"With high market prices for sheepmeat and beef globally, and a low New Zealand dollar, farmgate prices are relatively strong for sheep and beef farmers – beef cattle pricing in particular will drive revenue for 2022-23," says B+LNZ’s Chief Economist Andrew Burtt.
However, an increase in farm expenditure and inflation will reduce farm profit margins with farm expenditure expected to increase by 3.4 percent throughout the country for 2022–23 to average $535,000 expenditure per farm.
"Farmers are facing increasing inflationary pressure on farm and, despite efforts to curb spending, it’s a fight to keep costs down," says Burtt.
"With revenue similar to last season and costs creeping upwards, overall profit decreases. Farm profit before tax for 2022–23 is forecast to decrease 9.7 percent to average $181,100 per farm.
"From 2021–22 to 2022–23, gross farm revenue is forecast to fall by $2,000 per farm, whereas total expenditure increases by $17,400 per farm."
Burtt says a fall in farmgate prices and fewer lambs sold will impact sheep revenue and the lamb crop for spring is expected to be down on last year.
"This is due to a lower number of breeding ewes and drought conditions this past autumn for farmers in Waikato, South Auckland, Southland, and parts of Otago," he says.
"Snowstorms in early October also impacted lambing in the South Island, particularly for hill and high-country farms, but cattle revenue is expected to increase for 2022–23 thanks to strong farmgate prices."
B+LNZ chief executive Sam McIvor says that despite strong demand and high prices, farmers are rightly concerned about new cost pressures, including regulatory costs being created by the Government.
"The increasing costs on the horizon together with the uncertainty around the Government’s proposed agricultural emissions pricing system and its impacts are a double whammy."
McIvor says that while farmers are used to adapting to challenges and are willing to play their part in reducing greenhouse gas emissions, the emissions pricing system the Government is currently consulting on disproportionately puts sheep and beef farmers and communities at risk.
"What is on the table is unacceptable. In addition to pricing some farmers out of business, it will also increase food prices, cost jobs and ultimately reduce New Zealand’s export income. That is why we are adamant that the Government must make changes to what it proposed."
The red meat industry currently accounts for more than 92,000 jobs, which is almost 5 percent of the total national employment, nearly $12 billion in industry value added and $4.6 billion in household income, including flow on effects.
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