20 Aug 2008

Higher profits on the way for sheep and beef farmers

8:40 pm on 20 August 2008

Meat and Wool New Zealand is forecasting a big lift in sheep and beef farm profits in the coming season as they recover from the lowest level in 50 years.

In its new season's outlook, the organisation's economic service predicts average farm profit will increase from less than $20,000 to $53,000.

The economic service's executive director, Rob Davison, says while that will be a significant improvement, it is still below profit levels that sheep and beef farmers were getting four or five years ago.

Mr Davison says the increase is partly due to tight meat and wool supplies in the world market, as well as the lowering exchange rate which lifts exporters' incomes.

He says the average price for lamb would increase from $56 to $73 this coming season, based on a 75 US cents exchange rate.

Beef prices would rise by 15% at the farm gate.

Strong wool prices would also lift, but Meat and Wool New Zealand's economic service is forecasting prices for fine and mid-micron wool to stay flat, as recession bites into retail demand for woollen apparel in the United States and Europe.

Mr Davison says the supply squeeze is also going to restrict meat and wool export earnings, which it is forecasting will be a little below last year's.