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While the forecast for global sheepmeat and beef demand is generally positive, an increase in farm expenditure and inflation could significantly reduce farmers’ margins.
This is according to Beef + Lamb New Zealand’s (B+LNZ) New Season Outlook 2022-23.
“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.
The Season Outlook summary report states that with demand outpacing supply worldwide, even a slight decrease in export receipts will not stop returns from improving (up 27% for beef and up 20% for sheepmeat compared to the five-year average).
However, an increase in farm expenditure and inflation will reduce profit margins, with farm expenditure expected to increase by 3.4 % throughout the country for 2022-23 to average $535,000 expenditure per farm. Despite efforts to curb spending, the report says inflationary pressures will make it hard to keep costs down.
“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% 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 – due to lower numbers of breeding ewes and drought conditions affecting growth – will impact sheep revenue and the lamb crop for spring is expected to be down on last year.
“Snowstorms in early October also impacted lambing in the South Island, particularly for hill and high country farms. However, 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 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% 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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