Farming outlook sowed with peril

It's lean times for some farmers as others enjoy living off the fat of the land.

The Government's yearly report on the state of the primary sector shows a horror year for horticulture but showcases dairy's ability to shrug off bad weather.

Sheep and beef farmers are having the best time of all, with gross revenue up 9 per cent, beef exports to Asia sharply increased and confidence strong that lamb prices will hold up, the Ministry of Agriculture and Forestry's 2005 farm monitor report says.

Dairy farm revenue also lifted 9 per cent in 2004-05, due to the increased milk payout, but the weather dampened milk production by 4 per cent to 10 per cent and put a big dent in cow fertility.

Gross farm revenues in the $12 billion dairy export industry were budgeted to drop 1 per cent in the 2005-06 season, MAF said. However, morale and confidence were high, with most farmers happy with the direction being taken by co-operative Fonterra, which controls 96 per cent of the country's milk supply.

A bad year for the horticulture sector shook grower confidence. Export earnings were weak because of high exchange rates, increased production costs and competitors' product flooding major markets.

Unlike meat and dairy farmers, growers were not buffered from the effects of the strong kiwi dollar by high international commodity prices. But MAF noted that the sector had weathered high exchange rates before and could expect to see export earnings surge again.

Deer farmers had another tough year, with venison earnings recording an all-time low in the South Island. Velvet returns also posted a record low.

Major weather swings hit arable farms but, overall, the weather suited most crops. The sector's bottom line remained static.

In the wine sector, MAF found average prices for the major varieties fell in 2005. Confidence about vineyard profitability fell as downward price pressure became a reality. The 2005 harvest produced the second largest vintage on record at 142,000 tonnes of grapes.

Land prices continued to rocket, said MAF, which bases the sector reports on model farms. The price of dairy farms kept increasing.

Sheep and beef farmers expect a 3 per cent lift in gross incomes next year due to productivity improvements, and sector confidence was high. Sheep are now more profitable than cattle.

MAF said dairy farmers were struggling into the 2005-06 season short of stock and many were technically operating at a loss.