Beef and Lamb New Zealand's mid-season update, released yesterday, was 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% to $82,400 per farm, mainly reflecting a drop in sheep revenue, BLNZ economic service chief economist Andrew Burtt said.
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, Mr Burtt said.
In Otago-Southland, gross farm revenue decreases 4.5% to $392,600 per farm for 2015-16, while farm profit before tax decreases 16% to $76,100. When compared with 2013-14, farm profit would have reduced by 40%.
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.
Average Marlborough-Canterbury farm profit was expected to fall 51%, while the average North Island farm profit was projected to decrease 12%.
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% for medium wool (698c), to 5.2% for fine (963c) and strong (428c) wools.
Cattle revenue was forecast to rise 2.1% 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%, 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, such as lamb fores and mutton, were down more than 30% on the same period last year.
Operationally, it had been a challenging summer on account of the impact on livestock supply patterns, due to changes in the weather and weaker global market conditions for beef and, particularly, sheepmeat.
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% and the mutton kill up nearly 25% on the same period 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% on the same week last year and those variations made it very difficult to manage capacity and sales orders.
It was expected March would return to more traditional numbers, Mr Hewett and Mr Hamilton said.
