Farmers in New Zealand’s sheep and beef sectors are facing a tough year ahead, with a new study predicting a 30% fall in profits for the upcoming season.
Released today, the Beef and Lamb New Zealand (B+LNZ) New Season Outlook for 2023-24 suggests that although there may be a slight uptick in global demand for beef and sheep meat, the gains are likely to be offset by rising operational expenses, impacting farmers’ incomes for the second year running.
According to the report, the average profit before tax for the 2023-24 season is pegged at NZ$88,600 per farm, or around €50,354. When adjusted for inflation, this sum dwindles to NZ$54,800 per farm, approximately €31,145, marking a 25% dip in profits compared to figures from the 2004-05 financial year.
Andrew Burtt, the chief economist at B+LNZ, cautioned that the agricultural community in New Zealand should brace for another challenging year. “While we expect farm-gate prices to remain fairly stable, the rising costs, fuelled by inflation and high-interest rates, will eat into farm profitability,” Burtt noted.
He added that this anticipated 31% drop in profits comes on the heels of a 32% decline last year, resulting in profits being slashed by over half in just two years, a low not seen in 15 years when adjusted for inflation.
The precarious global economic landscape, including uncertainties surrounding China’s economic rebound and the softness in other key markets, adds another layer of complexity to New Zealand’s red meat sector outlook.
New Zealand farmers are also likely to face increased competition from Australian red meat exports to China. “Should China’s economic recovery lag or Australia face severe drought conditions, it could further dampen prospects in New Zealand’s primary markets,” Burtt elaborated.
The study also underscores that New Zealand exports the lion’s share—over 90%—of its meat production, making global economic conditions a key factor in determining local pricing. The report anticipates a decline in profitability across the board, with farms focusing on sheep rearing expected to be the hardest hit due to stagnant lamb prices.
This comes at a challenging time for many farmers who are still grappling with the aftermath of last summer’s cyclones and are bracing for potential droughts linked to El Nino.
Burtt stressed the need for sound financial planning for farmers in the coming months. “It’s crucial for farmers to scrutinise every operational input to ensure it boosts productivity and profitability, while also working closely with financial advisors and bankers to manage debt and tax commitments effectively,” he said.
Notably, the B+LNZ report does not factor in any additional costs that could arise from new government regulations.