Beef and sheep profits on farms in New Zealand could fall by as much as a third due to high inflation and reduced livestock prices.

According to the Beef and Lamb New Zealand Mid-Season Update, farm profit before tax is estimated at NZ$146,300 (€84,641) – a 31% decline from 2021-22 and below the five-year average.

The report comes following the stark drop in demand for sheepmeat at the start of the season before China relaxed its zero Covid-19 policy.

“As 85% of New Zealand’s mutton exports are to China, this impacted export receipts, which were one third lower compared to the same period last season,” said Beef and Lamb New Zealand chief economist, Andrew Burtt.

He also added that a recent case of bovine spongiform encephalopathy (BSE) in Brazil is also tightening global beef supplies.

Add in the huge pressures caused by inflation which have caused on-farm costs to increase sharply and he said any profits are being eroded by what remain historically pretty good farm gate returns.

The report points out that falling farm gate prices have resulted in New Zealand farmers deferring repairs and cutting back on fertiliser use in a bid to save money. However, inflation and the increasing price of farm inputs are outweighing cost-cutting initiatives.

Furthermore, it warned that managing cashflow will be a challenge on beef and sheep farms this season due to refinancing and extended overdraft borrowing.

Mr Burt added: “Overall expenditure has increased to an average NZ$531,500 (€307,764) per farm in 2022-23.

“Fertiliser, lime, and seeds expenditure is forecast to increase by 6% to average $102,100 (€59,139) per farm, following a 15% increase last season. This is the largest area of expenditure for sheep and beef farms at around 19% of farm expenditure in 2022-23.”

The full impact of Cyclones Hale and Gabrielle is not yet known.

“Slips and silt destroyed farm infrastructure and stock losses are not fully accounted for after Cyclone Gabrielle. The economic impact on the supply chain for agriculture will be felt for years to come,” Burtt said.

Extremely dry conditions are also impacting farms in Otago and Southland.

Sam McIvor, chief executive of Beef and Lamb New Zealand said the significant financial pressures facing farmers are another reason the government should stall environmental policy changes.

“Almost one third of New Zealand’s sheep and half of New Zealand’s beef cattle are in the North Island regions that were subject to a state of emergency following the cyclones.

“Another third of New Zealand’s sheep and 14% of New Zealand’s beef cattle are in Otago and Southland.

“This means two thirds of New Zealand’s sheep flock and two thirds of New Zealand’s beef cattle are in areas either suffering from the effects of the cyclones or suffering very dry conditions,” he said.

“Simply put, the prime minister needs put a stop to the tsunami of legislation and regulations that is constraining the food-producing export-earning sector,” Mr McIvor concluded.