Sheep and beef farm profits tipped to rise

About 25.6 million lambs were tailed last spring, down 1.9 per cent from 2012. Photo / APN

Sheep and beef farm profits are expected to jump 35 per cent over 2013-14 from last year's drought-affected season, with lamb prices expected to hit $100 a head, says Beef and Lamb NZ.

At that level, the per head lamb price would be an 18 per cent improvement on last year's and 2.5 per cent higher than the average for the previous five seasons, the industry group said in its mid-season market update.

Beef and Lamb estimated that farm profits before tax for the 2013-14 season would rise to an average of $113,700 a farm, thanks to better pricing and strong demand.

The industry group's chief economist, Andrew Burtt, said total gross farm revenue was expected to increase by 9.2 per cent over the season to $460,200, reflecting a 12 per cent increase in sheep revenue.

Total farm expenditure was estimated to be up 2.8 per cent, to $346,500, on the back of increases in repairs and maintenance spending. Interest costs were expected to drop by 2.6 per cent, thanks to a slight decrease in farm debt and lower interest rates.

Reduced lamb availability in New Zealand and Europe, combined with strong demand for lamb from Asia and the Middle East, is expected to support lamb prices, Burtt said.

About 25.6 million lambs were tailed in spring 2013, down 1.9 per cent on the previous year. Breeding ewe numbers remain static, reflecting a stabilisation of the national ewe flock.

Burtt said the country's overall export lamb production in the year to September 30, 2014, was expected to be down 3.5 per cent, to 362,900 tonnes carcass weight.

In 2013-14, export lamb slaughter is expected to decrease 5.3 per cent compared with a high slaughter in 2012-13 which was pushed up by widespread drought.

"This season's decline in numbers is expected to be partially offset by a 1.9 per cent estimated rise in the average carcass weight, to 18.3kg, the second-highest average carcass weight," he said.

The season's total export cattle production is estimated to decrease 1.1 per cent to 573,000 tonnes carcass weight, following last year's high processing numbers, which were driven by the North Island drought. Internationally, the US total cattle herd is around 88 million head - the lowest January inventory since 1951.

US exports are expected to drop, by about 8 per cent, while beef imports should increase about 1 per cent, according to Burtt.

Meanwhile, total Chinese beef imports are projected to grow by more than 15 per cent in 2014. Beef and Lamb said the US was expected to remain New Zealand's largest market for beef and veal exports.

Meaty result

• Sheep and beef farm profits expected to jump 35% from last year's drought-affected season.
• Profits before tax for the 2013-14 season expected rise to an average of $113,700.
• Gross farm revenue expected to increase by 9.2% over the season to $460,200.
• Lamb slaughter forecast to decrease 5.3% compared with 2012-13.