Media Statement

16 June 2003

MAF Monitor Farm Results Show Income Drop

Deer, dairy and drought affected farmers are bracing themselves for lower farm incomes and have modified their spending patterns accordingly, Agriculture Minister Jim Sutton said today.

The findings are part of the Agriculture and Forestry Ministry's annual farm monitoring report, which looks at the agricultural sector for the year about to finish (30 June) and forecasts the outlook for the next year.

The report indicates that during the 2002/03 financial year, lower farm gate returns for deer, milk solids, and beef especially have lowered farmer's spending power.

Mr Sutton said it was unlikely these products would increase significantly in the next year and this would lead to restricted spending and a lower farm tax take in the 2003/04 financial year.

"Surprisingly, farm land values have stayed up and in some cases increased further in 2003. The dream of building equity to purchase a farm has become elusive for many farmers. Most farm sales have been to existing farmers, perhaps signalling the difficulty in attaining first farm ownership.

"Stress levels are high among farmers, especially sharemilkers, because of financial pressure from the drought and falling cow prices. Sharemilkers have been hit hard as cow values have fallen.

"Although cow prices are expected to improve in 2004, many farmers are likely to chalk up significant losses. One feels for those sharemilkers who have been forced to sell their herds for only $400-600 per cow."

The report showed farmers are spending less on repairs, maintenance and capital items. Spending dropped off significantly in the quarter to 30 June 2003 as farmers came closer to calculating real lower cash surpluses for the June end year.

Mr Sutton said lower interest rates would provide some opportunity to maintain fertiliser inputs, which farmers generally now regarded as an essential input, but with closer attention now being paid to soil tests in accurately establishing optimum fertiliser use.

The recent mild weather in May and early June greatly assisted pasture recovery in the drought areas affecting the lower North Island. This has helped farmers as supplementary feed levels are very low in nearly all drought-affected areas, and many farmers will have to spend extra making silage, balage and hay in 2003/04.

But for many in drought areas, lambing percentages will be lower in the spring, perhaps by up to 10 percent on average. Whatever the lambing percentage, providing adequate feed in spring will be a challenge for many farmers.

Arable farmers are faring well and look forward to another good year, despite the drop in world cereal prices, while farmers and agricultural contractors report ongoing difficulties sourcing skilled labour.

A full report will be available in mid-July.

Attached are the regional figures.

|------------------------------+----------+-----------+-----------|
|Model | 2001/2002|2002/2003e |2003/2004f |
|------------------------------+----------+-----------+-----------|
|Waikato Dairy | | | |
|------------------------------+----------+-----------+-----------|
| Cows Milked | 248|255 |264 |
|------------------------------+----------+-----------+-----------|
| Gross Farm Revenue ($) | 450,404|333,774 |328,077 |
|------------------------------+----------+-----------+-----------|
| Farm Expenditure ($) | 222,704|209,777 |208,034 |
|------------------------------+----------+-----------+-----------|
| Cash Farm Surplus ($) | 227,700|123,997 |120,043 |
|------------------------------+----------+-----------+-----------|
| Net profit before tax ($) | 180,188|81,810 |74,838 |
|------------------------------+----------+-----------+-----------|
| | | | |
|------------------------------+----------+-----------+-----------|
| Lower North Island | | | |
|------------------------------+----------+-----------+-----------|
| Cows Milked | 210|215 |230 |
|------------------------------+----------+-----------+-----------|
| Gross Farm Revenue ($) | 388,360|263,000 |285,000 |
|------------------------------+----------+-----------+-----------|
| Farm Expenditure ($) | 171,731|168,000 |168,000 |
|------------------------------+----------+-----------+-----------|
| Cash Farm Surplus ($) | 216,629|95,000 |117,000 |
|------------------------------+----------+-----------+-----------|
| Net profit before tax ($) | 172,830|43,467 |67,735 |
|------------------------------+----------+-----------+-----------|
| | | | |
|------------------------------+----------+-----------+-----------|
| Canterbury Dairy | | | |
|------------------------------+----------+-----------+-----------|
| Cows Milked | 540|553 |586 |
|------------------------------+----------+-----------+-----------|
| Gross Farm Revenue ($) | 1,090,900|881,100 |918,298 |
|------------------------------+----------+-----------+-----------|
| Farm Expenditure ($) | 661,400|598,600 |568,300 |
|------------------------------+----------+-----------+-----------|
| Cash Farm Surplus ($) | 429,500|282,500 |349,998 |
|------------------------------+----------+-----------+-----------|
| Net profit before tax ($) | 397,900|104,000 |101,800 |
|------------------------------+----------+-----------+-----------|
| | | | |
|------------------------------+----------+-----------+-----------|
| Central North Island Sheep & | | | |
| Beef | | | |
|------------------------------+----------+-----------+-----------|
| Hectares | 550|550 |550 |
|------------------------------+----------+-----------+-----------|
| Gross Farm Revenue ($) | 327,637|287,592 |283,147 |
|------------------------------+----------+-----------+-----------|
| Farm Expenditure ($) | 151,821|161,304 |159,578 |
|------------------------------+----------+-----------+-----------|
| Cash Farm Surplus ($) | 175,816|126,288 |123,569 |
|------------------------------+----------+-----------+-----------|
| Net profit before tax ($) | 153,017|108,953 |91,659 |
|------------------------------+----------+-----------+-----------|
| | | | |
|------------------------------+----------+-----------+-----------|
| North Island Deer | | | |
|------------------------------+----------+-----------+-----------|
| Hectares | 140|140 |140 |
|------------------------------+----------+-----------+-----------|
| Gross Farm Revenue ($) | 197,246|125,488 |116,385 |
|------------------------------+----------+-----------+-----------|
| Farm Expenditure ($) | 78,121|76,734 |68,067 |
|------------------------------+----------+-----------+-----------|
| Cash Farm Surplus ($) | 119,125|48,754 |48,318 |
|------------------------------+----------+-----------+-----------|
| Net profit before tax ($) | 98,380|23,640 |24,858 |
|------------------------------+----------+-----------+-----------|
| | | | |
|------------------------------+----------+-----------+-----------|
| Arable | | | |
|------------------------------+----------+-----------+-----------|
| Hectares | 259|259 |259 |
|------------------------------+----------+-----------+-----------|
| Gross Farm Revenue ($) | 526,800|631,200 |638,000 |
|------------------------------+----------+-----------+-----------|
| Farm Expenditure ($) | 285,400|318,900 |310,800 |
|------------------------------+----------+-----------+-----------|
| Cash Farm Surplus ($) | 241,400|312,300 |327,200 |
|------------------------------+----------+-----------+-----------|
|Net profit before tax ($) | 157,900|201,800 |212,500 |
|------------------------------+----------+-----------+-----------|

E = Estimate F= Forecast

Gross Farm Revenue: The total farm income deducting stock purchase costs only.

Cash Farm Expenditure: Expenditure needed to for production not including interest, rent or lease costs.

Cash Farm Surplus: Gross Farm Revenue minus Cash Farm Expenditure.

Net Profit before Tax: Cash Farm Surplus less interest rent and lease cost and less depreciation and the change in stock values. It is the money left for drawings, principal repayments, development and capital purchases.

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