Flood of Aussie lamb bites into Kiwi on-farm profitability

The New Zealand industry's research and development body, Beef and Lamb NZ, says the expected profitability for this financial year will be broadly similar to the 1980s, adjusting for inflation.

It's mid-season update paints an outlook that has worsened from six months ago. While the sluggish Chinese economy is probably the biggest driver pushing Kiwi sheep meat prices south, Australian lamb flooding the market because producers here sold in big numbers ahead of an El Nino prediction that did not eventuate has also played a big role.

An excellent lamb crop in spring 2023 will see bigger numbers of lambs to sell, but while more lambs to sell is helpful it doesn't offset the low prices, Kiwi producers say.

For farmers like Dean and Sarah Rabbidge and Ed Pinckney and Harriet Bremner-Pinckney, it is diversification that is keeping them afloat at the moment.

Both couples have sheep, beef and dairy enterprises in Southland on the southern most tip of NZ.

Dean and Harriet are former Zanda McDonald Award winners.

Rabbidge Farms at Wyndham is made up of three separate blocks, plus some leased country, with the 245 hectare home farm, Don View, being in the family since 1889.

All up the operation is 590 hectares of picturesque hilly country which runs 14.95 stocking units per hectare and is entirely pasture-based.

Lambs produce 292 kilograms a hectare, mutton 22kg; the 68ha dairy unit turns off 1140kg of milk solids a hectare and Rabbidge Farms produces 22530kg of high micron wool per annum.

It's a very low-cost operation, which will go a long way to keeping affairs in order this season when milk and sheep income will be evenly split, compared to the usual 75pc that sheep provides.

Beef is only a small part of the equation, with 30 mixed breed pregnancy-tested-in-calf cows on deck at the moment.

Milk, at 3.8pc protein and 4.5pc fat, is sent to Fonterra. The Holsteins are run on perennial ryegrass and clover with some plantain, with 14 seasons typically obtained from a stand.

Lambs are marketed at 8 months, with a target carcase weight of 18kg. Rabbidge runs 4500 ewes 1300 hoggets, with lambing for Suffolk Texel or Suffolk Beltex terminals starting at the end of August and Romney maternals a fortnight later.

Survival rates are around 80pc, with lambing in 5cm of snow not unusual.

Rabbidge typically winters 9000 stocking units and must work on a feed budget of zero growth from June 1 to the end of August.

By then, there are only breeders on-farm and they go on sown crops like brassica, kale and fodder beat in December.

"The storms can be horrendous here and because lambing is spread out over three months we are at risk three times," Mr Rabbidge said.

Survivability is the number one trait selected for, in both sheep and beef, followed by fertility and eye muscle area.

Dairying will always have to be a part of the business and the reasons for that have never been more evident than this year, Mr Rabbidge said.

"We might change how we go about the dairying, whether we are hands on or in a partnership where we are a silent partner, but that monthly cash flow drives everything.

"Rising input costs are our biggest challenge right now. We've seen on-farm inflation increase to 17pc and interest rates go from 3.25 to 8.25pc in the past 18 months.

"At the same time, the $145 to $150 we got for our lambs last year will this year be $110.

"So it's been the perfect storm."

But it wouldn't take much to turn around, he said.

"Just a 1pc drop in interest rates and $10 lift in lamb prices, it'd be good sailing again," Mr Rabbidge said.

The Pinckney's 1500ha Jericho Station at Manapuriruns 8000 Perindale sheep, 350 Angus breeders and grazes cows from the couple's nearby 700 Holstein farm, Waipango, near Rivendon.

Two thirds is steep hills and 500ha is flats of improved pasture, with 90ha of crops in winter such as swedes and kale.

Half that goes to dairy cow grazing and the rest for young stock.

This year, Jericho will finish 6000 lambs to 40kg liveweight.

It will send 300000 kg of milk solids to Fonterra. The beef cattle are turned off as weaners but the longer-term plan is to grow them to feeders.

At the moment, however, the return on dry matter means grazing the dairy animals is a better return.

"Wintering costs a lot of money whatever livestock it is but it's about looking for where the best value is, especially given the triple whammy we're up against now," Mr Pinckney said.

Input costs have jumped 30 to 40pc in the past two years, interest rates have doubled in the same period and lamb prices are back 20 to 25pc.

"Beef has held its own and milk prices are down 10pc on the back of China demand softening due to the economic downturn," Mr Pinckney said.

"We're just trying to ride that out and figure out where the new norm will settle. Three years ago we were making good money out of lamb at $8/kg or $150 a carcase. To get it back to that price is one thing but to make the same margin we really need that lamb price to be $9-$10/kg now."

Across the board, NZ lamb prices are now 13pc below the five-year average and the mutton price, at $63 per head, is 34pc down on last season and 49pc below the five-year average, Beef and Lamb NZ figures show.