Sliding dollar brings a bonus

Sheep and beef farmers are expecting a 6 per cent lift in gross farm revenue to $4.6 billion as the dollar's value falls over the coming year.

Meat and Wool NZ economists say the overall outlook is for a weakening of the dollar.

About 22 per cent of the revenue would be a $1 billion profit before tax, to be spent on mortgage repayments, taxation, replacing capital equipment and living expenses.

The other 78 per cent - $3.6 billion - would be spent on farm running costs ranging from shearing to rates.

The profit before tax was forecast to increase 28.5 per cent to an average of $67,100 a farm.

Meat and Wool's economic service director, Rob Davison, said that because more than 80 per cent of farmers' meat and wool production was exported, the exchange rate had a major effect on prices.

Exchange rates used in the annual price forecasts for the 2006-07 season were US61.4c (down 6 per cent on last year), 33.4p (down 8 per cent) and €0.46 (down 12 per cent).

Davison said that if the season average exchange rate dropped a further 5 per cent from these forecasts, gross farm revenue would increase by $329 million and an average rise of $21,500 (a 7.2 per cent rise) a farm.

Such a drop in the value of the dollar would increase spending on machinery and on imports, by about $1620 a farm.

- NZPA