Livestock Update – June 2020

Inland Revenue have recently announced this year’s livestock Herd Scheme Values and we think this is a great opportunity to update you on the latest movements.

The Herd Scheme Values are the National Average Market Values as determined by a process involving a review of the livestock market as at 30 April.

For a closer look, here’s some analysis on specific livestock classes:

Dairy Cattle

The values for Dairy this year are a mixed bag, with some values increasing against the general trend of decreases. The overall values for dairy have held up far better than sheep and beef values. This has occurred for two reasons, firstly R1 and R2 values are influenced by live export demand, with live exporters securing dairy heifers at a premium to the local market. Second, the demand for replacement herds following Mycoplasma Bovis has had a supportive effect on values

A Mixed-Age Dairy cow now has a National Average Market Value of $1,525 compared to $1,513 last year – a rise of 0.8%. Rising two-year heifers have dropped by a little over 4% to $1,222. Rising one-year heifers have increased by 7.59% to $737.

The impact of COVID-19 has not been as widely felt in dairy values compared to sheep and beef, but has created significant uncertainty for the future outlook in terms of the farmgate milk price and consequently market values for dairy cattle. COVID-19 is likely to see some retrenchment in international markets, which could see demand for traditional New Zealand dairy products fall, but at the same time, there is increased demand for some of our niche products, particularly for pharmaceuticals. It remains to be seen what impact this will have in the short term.

Changes to the proposed water quality standards have provided some relief for farmers, and dairy farmers in particular. However, water quality standards will continue to pose a risk to production capacity where nitrogen fertiliser is essential to maintain milk volumes. Labour shortages are also likely to create issues due to the unavailability of migrant workers as a result of COVID-19.

Beef Cattle

Beef values have fallen back sharply as a direct result of COVID-19, with both processor capacity and overseas demand having an impact on values. R1, R2 and Mixed Age Cows have fallen in value by 26.64%, 19.05% and 19.56 % respectively, the lowest values in five years.

As with sheep and deer, COVID-19 has had a significant impact on values and presents significant uncertainty across all markets for the foreseeable future. Overseas demand is likely to remain muted for a considerable time as European and US restaurants remain closed.

On the domestic front, renewed threats to land use from forestry, water quality requirements, particularly in relation to fencing waterways and an upcoming general election all paint a picture of uncertainty over the coming 12 months.

Sheep

After four years of increasing values, 2020 has seen a steep decline in values with an 18% average drop. A two-tooth ewe is now valued at $177 compared to $214 in 2019. This equates to a 17.3% decrease. Only rams bucked the trend with a small increase in values to $340.

Drought has also played a part in the depressed values as farmers, particularly in the North Island and upper South Island have had to destock. Values have started to pick up again in the past month, but uncertainty in international markets, particularly the high-value restaurant trade in Europe and the United States leaves a large cloud hanging over future values.

Deer

Deer values have seen a significant reversal of the gains of the past five years and have dipped below the 10-year average across all types. This is even more keenly felt in the “other deer breeds” class as the demand for trophy animals suffered significantly because of COVID-19.

Goats

Perhaps the shining light amongst generally depressed values are the values for all classes of goats with values up on average 15.6% across all types. Increased values have arisen from a combination of increased demand for mohair and goats’ milk and increased demand for goat’s meat as an alternative to beef and lamb.

Keep in Mind

Careful consideration needs to be given to your livestock election choices. Even though changes were made to the Herd scheme in recent years, there is still flexibility around how to value increases in numbers – if you increase your numbers during the year you are able to choose an alternative valuation option to value that increase. Whether you take that option or you elect to value the increase using herd values will depend on a number of factors, such as:

  • where we are in the cycle of livestock values (e.g. at the bottom, or at the top)
  • if the increase is a permanent or a temporary one
  • your longer-term intentions

As the decision is clearly one that should be made on a case by case basis, we will naturally discuss your valuation options with you on review of your 2020 Financial Statements and Taxation Returns.

Click to download a copy of our Livestock Special Alert, June 2020 [PDF 1MB]

Help for Farmers

Disruption is nothing new for farmers.

For years, they’ve been battling drought, market volatility, Mycoplasma Bovis, and now COVID-19. But, like the rest of New Zealand, staying positive and reviving the economy is vital.

“We’re all in the same storm, just different boats” rings true when it comes to the impact of COVID-19 on farmers around New Zealand. Despite challenges for all, most will agree that being an “essential” was a good waka to be in.

Income Equalisation Scheme

Are you aware of the Income Equalisation Scheme?

It allows farmers to even out fluctuations in income by spreading gross income from year to year. Talk to us about whether it could help ease your tax position.

Help with Funding

Are you looking to seek funding?

If you’re approaching your bank for financial support, go with a plan. They’ll be more likely to help if you can tell them the problem, what’s caused it, what you are doing about it, what you need from them, and how the bank will be paid back.

We can help you strengthen your business plan and ensure you have all the financial information at your fingertips.

We are just a phone call away: (06) 878 8824.

Take Stock and Thrive

Top tips for working ON your business in 2019

When you’re head down in the day-to-day running of your business, it’s hard to know what needs to be done behind the scenes to ensure future success.

You don’t have to set aside an entire day to get all your planning, accounting and networking done. Do it in small intervals throughout the year. Choose a time when you know you’re not going to be knee deep in calving or picking and make it a priority. Working ON your business is just as important as working IN it.

Whether you want to expand, develop or maintain your current activity, consider the following advice.

Bring in the experts.

Having a fresh pair of eyes is crucial when you’re busy doing the do. Think of trusted, knowledgeable professionals who can help or give advice on monitoring your business plan, your finances, employment, environmental management, funding and networking. Getting a rural business mentor is a great place to start.

Connect to other farmers.

Working in a silo can be lonely and overwhelming so link up with others who share the same challenges. In the dairy industry, you can sign up to a free service called Dairy Connect, which puts you in touch with a support farmer happy to help. Look to your industry groups for networking opportunities and events.

Know your numbers.

Big, small, milk or fruit – when you rely on living produce it makes accounting more complex. Record your stock numbers and any land use changes, understand depreciation of machinery and equipment, stay up to date with Government subsidies, and use cloud apps for accounting, resources and bank accounts.

Talk it up.

Sharing key information about your business with everyone in your farm team will ensure no surprises, prevent conflict, lower potential issues, reduce wastage and give everyone a sense of ownership so they work harder, and smarter, together. Diarise regular meetings or phone calls to talk about cash management, budgets and production reports.

Make the most of your accountant.

To get your business and cash flow in the best position, talk to us, your accountant, about tax planning, accounting software, and discuss your plans for 2020 to see how the numbers stack up and what you need to do to achieve your goals. Call us on (06) 878 8824.

Health and Safety: Say it Loud and Proud to Lower the Risk

A ‘she’ll be right’ attitude towards health and safety won’t cut it. You’ve got to make a conscious decision to be safe and get everyone in your team thinking about health and safety every step of the way. Here are a few ways to do this effectively:

  • Get real. Sit down as a team (including family) and answer these three questions and then pin them where everyone can see them.
    • “Why do we want a safe and healthy farm?”
    • “What will we do to be a safe and healthy farm?”
    • “How will we make sure everyone who comes to our farm is safe and healthy?”
  • Prioritise it. When you meet with your team, put health and safety at the top of the agenda. Even just spend five minutes discussing any incidents, injuries or near misses, and see if anyone has any suggestions about new or upcoming seasonal risks, or new ways of doing things.
  • Keep it simple. When you’re planning the day’s or season’s work, take a moment to ask “What do we have to look out for?” It doesn’t need to be a formal briefing, just a conscious moment to think about any risks or maintenance issues.
  • Paperwork isn’t enough. Reducing health and safety mishaps isn’t about documents and manuals – it’s about thinking and talking about risks and doing what needs to be done to stay healthy and safe.
  • Be vigilant. Make sure everyone on the farm knows how the risks can change with the time of day, the season, or a person’s emotional or physical state.

If you would like to chat to the Epplett and Co. team about health and safety concerns in your workplace call us on (06) 878 8824.

Livestock Herd Scheme Values 2018

The IRD have recently announced this year’s livestock Herd Scheme Values and we think this is a great opportunity to update you on the latest movements. The Herd Scheme Values are the National Average Market Values as determined by a process involving a review of the livestock market as at 30 April.

Dairy Cattle

With the exception of breeding bulls, all classes of Dairy cattle have dropped in value compared to the previous year. A Mixed Age Dairy cow now has a National Average Market Value of $1,529 compared to $1,649 last year – a drop of 7.3%. Rising two-year heifers have dropped by a similar percentage to $1,313. Rising one-year heifers have a larger decrease of 15.6% to $691. If you recall, there was a very high demand for R1 heifers 12 months ago which inflated that value at year end. This demand has now eased off and the value has dropped back accordingly.

There is certainly some variability throughout the country regarding mixed age cow prices. While the milk price remains strong and potentially increasing, there is obvious nervousness in the industry given the recent outbreak of Mycoplasma bovis cattle disease. The culling of herds in the South Island may push local values up – although due to restriction on stock movements and farmers’ reluctance to introduce new cattle to their herd, we really do need to take a “wait and see” approach regarding where values are heading in the future.

As the Herd Value is a country wide average, we need to consider each client’s circumstances when buying and selling herds and look at what these average values mean for you.

Herd Scheme Values - Dairy Cows 2018

Beef Cattle

Beef values are very much in line with expectations. Following on from four years of increases in values it is not surprising to see an easing or flattening out of beef values for the 2018 year. Mixed Age Cows were the only beef class to increase in value – from $1,431 to $1,497 – an increase of 4.6% – the fifth successive increase. All other classes eased somewhat with small drops in value.

Part of the reason for the decline is the dairy cow kill which is clogging meat processing plants at the moment. This has made store markets a little nervous meaning there is a slight fall in confidence levels – reflecting in the price of meat. The chilled beef market in the UK and China has helped to offset an increase in beef volumes coming out of the US market which would otherwise have negatively impacted NZ beef prices.

Herd Scheme Values - Beef Cows 2018Sheep

2018 has seen another rise in sheep values with an average increase of 15.5%. A two-tooth ewe is now valued at $179 compared to $150 in 2017. There are good feed supplies throughout the country at the moment which is allowing producers to add weight to their animals and benefit from an increase on price. Confidence in the sheep market is definitely buoyant.

Herd Scheme Values - Ewes 2018Deer

Deer values are continuing their upward movement with Mixed Age Hinds increasing by 8.7% from $526 to $572 per head. Key markets in Europe and North America are leading to increased demand for our venison which in turn has increased prices. There is also increased diversification in venison products such as meat and bone meal and venison trim.

Herd Scheme Values - Hinds 2018General

Careful consideration needs to be given to your livestock election choices.

Even though changes were made to the Herd scheme in recent years, there is still flexibility around how to value increases in numbers – if you increase your numbers during the year you are able to choose an alternative valuation option to value that increase.

Whether you take that option or you elect to value the increase using herd values will depend on a number of factors – such as:

  • where we are in the cycle of livestock values (e.g. at the bottom, or at the top)
  • if the increase is a permanent or a temporary one
  • your longer term intentions

As the decision is clearly one that should be made on a case by case basis, we will naturally discuss your valuation options with you on review of your 2017 Financial Statements and Taxation Returns.

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National Average Market Values Specified Livestock

The National Average Market Values (NAMV) of Specified Livestock Determination 2014 has been released by IRD.
If you have elected to use the herd scheme, these are the allowed values for the 2013/2014 year.

Here is the full listing of values.

We have also compiled an historical chart of Sheep and Beef values that may be useful.