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Bright prospects after positive farming year.

Tags: Rural Rural Insight

Farmers may rightly feel under siege in recent months, from the weather as much as from media coverage about the environmental impacts of farming, the rise of alternative proteins, and the tough toll the job can have on mental health.


But looking through the weather’s challenges and negative headlines, the farming sector has a highly positive story to tell as the farming year approaches its seasonal end.

Without exception every part of New Zealand’s farming sector has enjoyed a positive profitable year in terms of returns, delivering record incomes to provinces from Kaitaia to Bluff.

“Without exception every part of New Zealand’s farming sector has enjoyed a positive profitable year in terms of returns, delivering record incomes.”

Latest data from Beef + Lamb New Zealand (B+LNZ) will provide welcome end of season news for dry stock farmers, many who battled with tough times through the mid-2000s where farm incomes dropped to their lowest point since World War II.

In its latest economic service forecast B+LNZ has revised farm profit before tax up to $126,300 for its general “all classes” sheep and beef farm for 2017-18. That is a lift of 39% on last year.

B+LNZ economist Andrew Burtt said the positive news reflected strong returns for both sheep and beef.

Sheep revenue is expected to be up 22%, with lamb values revised well up on the start of the year, to average 661c a kg or about $120 a head for the season thanks to continuing strong demand and tight global supplies.

Despite the volume exported expected to be almost exactly the same as last year, the lift in value will push lamb meat returns to New Zealand over the $3 billion mark for the first time in history.

Beef is also expected to return in excess of the magic “3”, earning the country $3.2 billion this year, with a lift in value offsetting a 5% drop in export volumes.

And that’s just the meat component. Valuable contributions come from all the other co-products that come from an animal such as offal and skins.

Despite global beef production increasing, a growing Chinese appetite for beef is helping underpin the strong prices, while continuing growth in the United States economy has kept New Zealand’s sales of beef there buoyant.

“This is a really positive thing when we consider where the NZ dollar is, compared to 15 years ago. It indicates market demand is strong, and New Zealand’s key markets are in very good health.”

B+LNZ will continue to monitor the US-China trade situation, says Mr Burtt, but also advocate for New Zealand’s current access to the UK and Europe to be maintained following Brexit.

He also points to a level of reliance upon New Zealand product in a market like the US, where New Zealand’s leaner grass-fed beef is blended with feed lot cattle meat to produce a product – ground beef – that meets consumer needs.

“And as a supplier, New Zealand is still regarded as a very safe, reliable and consistent provider for a market that is still experiencing strong growth.”

A shortage in venison numbers and a concerted effort by DeerNZ to develop new off-season market niches has meant that sector is also experiencing record high schedule returns on meat.

“Building year-round venison demand and more consistent prices throughout the year have long been industry goals,” says Deer Industry NZ marketing manager Innes Moffat.

Demand is running comfortably ahead of available supply as farmers work to rebuild their herds after an industry slide through the 2000s.

Meantime across the fence in the dairy sector a tumultuous couple of years have steadied out this season, with Fonterra revising up its expected milk solids payout to $6.55/kg milk solids.

Such a solid figure puts dairy farmers, many who have had to take on additional debt in the past two years to cover the poor payouts, on a more confident footing.

DairyNZ economist Matthew Newman is also cautiously optimistic about the coming season, with expectations the dairy payout will be close to this year’s figure, and production this year is likely to only be down by about 1%.

“The good news has also been that as an industry we have managed to keep farm working costs low. For 2016-17 they averaged $3.75/kg milk solids. While likely to be up slightly this season, they are still significantly down on where they were at their height of $4.33/kg milk solids, back in 2013-14.”

Overall the dairy sector is expected to generate $16 billion in earnings this year, up on the $13.4 billion a year ago.

Horticultural returns are also looking highly positive across all crop types, with Zespri anticipating at $2 billion-plus crop for the first time this year. Apple growers are also 10% up in volume, with highly positive sales prospects across all overseas markets.

Industry leaders’ greatest concern in recent months has been more around finding pickers for harvesting and processing fruit, rather than where that fruit will be sold.

Bayleys national country manager Duncan Ross said the optimism in the primary sector is being reflected in the strong level of interest being expressed in pastoral and horticultural land. He said that interest was coming from both existing farmers and from outside investors looking for strong returns in markets with sustainable prospects.

“The optimism in the primary sector is being reflected in a strong level of interest being expressed in pastoral and horticultural land - coming from both existing farmers and from outside investors looking for strong returns in markets with sustainable prospects.”

“There have been some tough years across all sectors, and it is rare they all align as they do. But it suggests there is a maturing of our primary sector, focussing on providing increasingly wealthy markets with high quality, safe and sustainably sourced food – it is a great time to be part of the primary sector.”

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