Sheep Industry Needs Heavy Inflow Of Capital

Press, Volume C, Issue 29602, 26 August 1961, Page 7

Sheep Industry Needs Heavy Inflow Of Capital

There is no easy way of spending less on our farming operations without in the short or the long run slowing down tlie production of meat and wool and, conversely, the free spending by re-investment of farm profits in the farm itself in the years 1950 to 1960 has given us the greatest increase in production per year that we have known, says the Meat and Wool Boards’ Economic Service in an introduction to its annual review of the sheep industry for 1960-61.

Only by the heavy ploughing back of capital into” the pastoral industry will it be able to maintain production increases required to match the expanding economy.

The year had been one during which the narrowing margin of profit in. sheep farming had been receiving growing appreciation, the service says. The farming economic position reflected the national scene—the expenditure to which the country was committed to meet the demands of an expanding economy was greater than the possible receipts from produce sales. Unfavourable “The balance of payments has been unfavourable to New Zealand by the standards of spending which we have come to regard as ‘normal to our requirements. The difference between our receipts and our costs disclose an ever decreasing margin and it is apparent that to maintain solvency we must either reduce our spending or step up production where this can be done profitably—or adopt a combination of both,” it says. Slaughterings of all stock increased from 20,440,000 head in 1950 to 29,656.000 in 1960 —an increase of 45 per cent., or an average of 4J per cent, per annum. Wool increased 48 per cent., or nearly 5 per cent, per annum, from 390 million pounds to 577 million pounds over the same period. “This upward surge is directly due to the returns farmers were getting for their produce—including the wool boom of 1951 from which the wool retention moneys were spread over the next five years, and our returns show that during the

decade sheep farmers were reinvesting 90 per cent, of the available surpluses in those farming factors which contribute to increased production: fencing and water supplies. topdressing and overseeding, applying the latest fanning techniques such as the use of the aeroplane to extend the field of pasture improvement on the hills, and of the bulldozer to open up tracks and lay airstrips. “They have greatly improved the standards of livestock quality, cut down losses by the use of prophylactics which have been developed in post-war years, and over the period improved methods of grazfa g management have gone hand in hand with heavier carrying capacities.” Production expansion has given a greater exportable surplus of meat and wool and a greater amount of overseas funds on which to base the expansion of ' the national economy. This has cost money to achieve and, broadly, each £1 of gross production increase on sheep farms represents an investment of capital of £3 to start it off.

“Given no further capital investment the rate of growth of production must tend to reach 6 state of balance, provided fertility maintenance can be achieved. We have reached the stage where it is necessary to consider just how best the national fiscal policy should be directed towards preventing a slowdown of our production for export. “Government spokesmen have declared that their

policy is to ensure that expansion of primary production should continue unchecked. Various estimates have been made of what the annual expansion should be and it would appear that an overall 21 per cent, increase per year is the minimum we should look for—more if the terms of trade move against us.” With the pastoral industry's output in 1960 valued at ClBBm. annual output should be increased by approximately £sm each year. This calls for the ploughing back of £lsm each year on sheep farms, about £6OO a farm, in addition to established expenditure on production maintenance.

This envisaged the investing of approximately £lsom in the pastoral industry by 1970 to ensure the reauired increase in exnort volume, maintenance of local consumption and allowing for population growth.

Ambitious “This is an amb’tious programme but unless it is achieved we are in for a fairly thin time economically,” the service comments. According to its researches, the service says that to “merely maintain" farm expenditure at the level of the early 1950’s it would have been necessary for fat lamb farmers to have spent 49s 6d last year for every sheep carried. For three years expenditure had been below the estimated maintenance level. Because of the lag between expenditure and production in sheep farming the effect of this is only now becoming apparent irj meat and wool production fi “tires. The sheep population increase has levelled off, export meat production has not increased this year and wool production is up by less than 2 per cent. Unless sheep farm expenditure can be restored to the relative levels of 1954-57 there will not be a return to the rate of expansion which the pastoral industry achieved in those years, the service says.