This week’s mid-season update released by Beef+Lamb New Zealand (B+LNZ) has revised its farm profit forecast to a 54% drop compared with 2022-23, having forecast a 31% drop in its annual outlook published last October.

This means that farm profits for 2023-24 are forecast to be on average NZ$62,600 (€35,367) per farm and follows a 29% drop in farm profits the previous year.

This forecast is for the lowest level of farm profit since the financial crash of 2008 and B+LNZ says that when adjusted for inflation, it leaves beef and sheep farm incomes comparable with the 1980s and early 1990s.

B+LNZ defines farm profit as what is left after paying direct production costs to cover “tax, personal drawings, principal repayments, capital expenditure and development of the farm”.

Revenue for 2023-24 is forecast to decline by 18% for sheep producers and 7% for cattle, while farm expenditure is projected to increase by 0.7%.

Beef and sheep prices

The main cause for the slump in beef and sheep farming profits in New Zealand is farmgate prices, particularly for lambs.

Average cattle prices are 3% below the previous year at NZ$5.15/kg - the equivalent of €2.91/kg - which is exceptionally weak compared with European and US prices, but 2% above the five-year average in New Zealand.

High prices and supply scarcity in the US for manufacturing beef are credited by B+LNZ with keeping a floor on New Zealand cattle prices.

The average lamb price is NZ$125 (€70) per head and older sheep for mutton are worth NZ$63 (€36) per head. Lamb prices are down 12% on last season and 13% below the five-year average.

By way of comparison, a heavy hogget in Ireland last week was making up to €200 per head, almost three times the value of a New Zealand lamb.

Reasons for decline

While the New Zealand cattle price is weak compared with Irish prices, it reflects the huge dominance of dairy breeding in cattle, plus it is comparable with Australia and South American beef-exporting countries.

Specialised suckler beef production is well behind dairy and sheep in New Zealand pasture farming and it is the slump in lamb prices that is the main driver of a lower farm profit forecast.

B+LNZ says that the combination of weaker demand and the fact that “Australian meat has flooded markets” has hit the sheepmeat market.

Even though North American and European markets are strong at present, with China now being New Zealand’s main sheepmeat export market, its sluggish economy has had a negative impact on prices.