The average gross return from dairying is $9,000 a hectare, costs are about $5,ooo to $5.500 a hectare which leaves $3.5 to $4,ooo a hectare in profit.
Cropping returns around $4,000 a hectare with costs of about $2.5,ooo leaving $1,500.
Sheep grosses $1,500 a hectare with costs of $800 – $900 leaving just $600 a hectare in profit.
These figures show why cropping and sheep farmers are converting to dairying.
One of the consequences of that is less stock for the meat industry which is why no-one is surprised that Silver Fern Farms is likely to close its lamb cutting plant in Christchurch and its Belfast beef plant.
There is over capacity in meat processing and more conversions to dairying will only make it worse.
Land which is suitable for cropping is generally fine for dairying but not all sheep and beef farms are suitable for conversion. Some farmers who choose not to, or can’t, convert do dairy support instead – growing supplementary feed or grazing young stock and carry over cows.
But that’s not an option for all sheep and beef farmers. Many of these have been farming for capital gain and as land prices have slipped back they’ve been eating into their equity. That may be okay in the short term but it’s not a financially viable policy in the long term.
Forecasts for next season are cautiously optimistic about lamb prices but wool, pelts and other by-products are still in the doldrums and returns won’t come near those from dairying.
I have felt the sheep industry has been looking dubious for quite some time.
What concerns me is the industry-wide ramifications, and what is being done to address the long-term effects for the industry as a whole.
We used to farm 3500 ewes plus a few cows and some grain. Through a succession of different mixes we ended up with dairy grazers.
Stocked at 3.5/ha they were more profitable than most of the other enterprises – and we had capital to invest off-farm.
Given your figures Hp what is the future for sheep farmers – not to mention the down stream industries such as transport, processing, etc?
Fred – some of those who can convert will. Some will choose not to or won’t be able to.
There is still dmeand for lamb and beef and there will be a meat industry though I think we’ll see more works closing.
The meat industry and sheepa nd beef farming would be more viable if wool and other by-products were doing better.