Beef and lamb farm forecast cut

The average farm profit before tax nationally was predicted to be about $109,900 for 2015-16 but that was based on better lamb pricing conditions. Photo / File

Beef and Lamb New Zealand's mid-season update is a stark contrast to its new-season outlook six months ago. Then, the average farm profit before tax nationally was predicted to be about $109,900 for 2015-16 but that was based on better lamb pricing conditions.

Now, it had been adjusted downwards by 25 per cent to $82,400 per farm, mainly reflecting a drop in sheep revenue, said BLNZ economic service chief economist Andrew Burtt.

The effect of weak lamb prices was accentuated by an early lamb processing season, so a large percentage of lamb sales were into a weakening frozen export market, Burtt said.

South Island farmers were impacted more severely, due to the higher ratio of sheep to cattle farmed in the South and a second year of drought conditions in Marlborough and North Canterbury, he said.

An increase in wool revenue nationally was a "small positive", with the range of increase per kilogram of greasy wool forecast to be from 15 per cent for medium wool (698c), to 5.2 per cent for fine (963c) and strong (428c) wools.

Cattle revenue was forecast to rise 2.1 per cent to $120,400 per farm for 2015-16, on the back of cattle prices remaining relatively high.

New Zealand's overall export lamb production to September 30, 2016, was expected to be down 7.8 per cent, from 21.2 million to 19.6 million.

In the latest supplier newsletter, Silver Fern Farms chairman Rob Hewett and chief executive Dean Hamilton said sheepmeat markets were mixed, with chilled demand and prices at similar levels to last year. However, prices for frozen commodity items were down more than 30 per cent on last year.

Operationally, it had been a challenging summer. With a very dry January and February predicted, there was a stronger early lamb kill than last season. To the end of December, the national lamb kill was up 8 per cent and the mutton kill up nearly 25 per cent on the year prior.

Wet and warm weather then resulted in unexpected grass growth and stock numbers sent to processing started to slow in late January. By mid February, the season's numbers year-to-date nationally had changed significantly. In some weeks, kills were down 35 per cent on the same week last year and those variations made it very difficult to manage capacity and sales orders.