Challenging year for pastoral sectors

Following a tough year for the pastoral sector, financial prospects for dairy and deer farmers are looking good for 2007/08, according to the Ministry of Agriculture and Forestry’s (MAF) new annual Pastoral Monitoring Report.

Released today, the report provides commentary on the fortunes of the dairy, deer and sheep and beef sectors.

“Farmers coped with a range of adverse events in 2006/07 and demonstrated a capacity and willingness to adapt their businesses to meet the challenges,” says MAF Policy Regional Team Leader Gillian Mangin.

The deer sectors’ profitability improved in 2006/07, thanks to higher venison and velvet prices, after a string of difficult seasons that saw many farmers exit the industry. The outlook is for further improvement in deer sector incomes in 2007/08 on the back of improving prices, says Mrs Mangin.

In the dairy sector, farm operating surpluses fell in 2006/07, following three years where the profit available for reinvesting in farms was barely adequate. Dairy incomes are expected to recover dramatically in 2007/08 on the basis of Fonterra’s forecast payout of $6.40 per kilogram of milksolids – a 44 percent increase in one year.

“This is an opportunity for dairy farmers to restructure their finances and reduce debts,” says Mrs Mangin.

Expansion and intensification of dairy farming are also expected, she says.

Low prices for lamb and wool and challenging seasonal conditions saw incomes for the sheep and beef sector deteriorate in 2006/07 from their already low levels in 2005/06.

Sheep and beef farmers’ confidence was also knocked by the high exchange rate. Unless there is a rise from the forecast lamb and wool prices there is little prospect of incomes improving in 2007/08, says Mrs Mangin.

The report contains analysis and commentary on trends and issues of significance to the whole sector, including:

• Comparative levels of profitability between the dairy, deer and sheep and beef sectors and the effect on land use change;
• Farmers’ capacity for adaptation;
• Adverse events in recent times and the recently developed framework for government support;
• Labour issues in the pastoral sector.

The pastoral sector is of immense importance to New Zealand. It accounts for nearly half of its land use and merchandise exports.

The report is available on-line at http://www.maf.govt.nz/mafnet/rural-nz/statistics-and-forecasts/farm-monitoring/2007/pastoral/index.htm