Where will all the sheep dollars go?

Press, Volume CXI, Issue 32789, 14 December 1971, Page 1

Where will all the sheep dollars go?

(By

L. R. EARLY)

Will the Government assistance payable to farmers in the next few months go toward defraying existing indebtedness to their lenders, or will it simply become further spending power?

These alternatives will assume considerable importance as the Government, through the Department of Agriculture, begins to make payments to farmers in the New Year.

Morally, the farmer should use this money to defray his overdraft but human nature being what it is the cheque that he will receive, drawn on the Treasury, may well be diverted elsewhere.

Its first effect is likely to be seen in the store sheep market. At a place like Addington—the biggest store stock centre in the countryfarmers who buy in their replacement ewes, will be well aware that the final payout is based on stock numbers as at June 30, 1972. This could result in breeding ewes being traded at an artificial level, and one wonders, if the Government’s

plan is to meet a current situation, wtyy the effective date for assessing the payment was not set at June 30, 1971.

Generally, the freezing schedule has a strong bearing on prices paid for store sheep. A cast-for-age ewe with one to two years breeding life left, sells for the price of a fat lamb. A young ewe will fetch the price of a lamb, plus the value of a fleece, and sometimes a little more. But as her breeding life will last several years, the buyer is justified in budgeting for a small profit on her in the first year. Little better off If, through the Government plan for assistance, the price of ewes becomes inflated by up to $1 a head, the many fanners who buy in replacements for breeding, are little better off in meeting a : current situation relating to ' indebtedness. On the other hand, there t is a point of view that an : extra dollar spent in the mari ket must benefit the vendor of store stock. In this case, • he is the hill and high couni tryman. These people have • had a very lean time. During i drought conditions in the

usual fattening districts last year, their returns for store lambs reached a very low point. However, one would not like to see the Government payout result in a sharp lift in the store stock market, as the hill and high-country farmers, along with others, will be getting the $1 a head on their breeding stock. The forgotten man in decisions made last week is the small holder. There are an estimated 1200 of them in Canterbury. Many of them farm on good country, carrying out mixed cropping rotations, including potato growing, and some of them dairying. Probably few of them are growling about not receiving a dollar a sheep, but they may well have some complaint when they buy in their ewes. If the market lifts, as well it might, they will have to pay more. They may well feel that, in line with trends everywhere, things are loaded in favour of the big man. Then there is the case where a payout is simply not justified. Take the case of the sale of a farm in which buyer ; takes over stock and plant ■ at valuation. To the buyer the

Government payout will be simply a bonus. With all these considerations aside, there remains a large number of sheep farmers for whom the payout will not hold a great deal of material significance. With returns for lamb and fine wool being well down on last year, the $1 a sheep assistance will merely help to lift incomes a little closer to last year’s level. So, even at that, the payout will not be regarded as a very strong injection. The situation affecting

many farmers becomes selfexplanatory once expressed in figures. Take the case of a man of 300 acres, with a Government valuation of $48,000 and a mortgage of $26,000. He runs 1 200 sheep, 900 of them ewes, and grows 50 acres of crop. Sales of sheep last year grossed $3300, wool $2200, and grain $3OOO, a total of $B5OO. Total expenses, including personal drawings of $1750, amounted to $lO,BOO, leaving a deficit of $2300. A second case involves a man who, to assist his position, did a lot of outside work, including shearing and seasonal work. Returns from sheep produced $3200, wool $2600. and grain $1200,. a gross figure of $7OOO. Farm working expenses, including depreciation, amounted to $7350. Although he made no personal drawings on the farm account, he was still $350 “in the red.”

But he is by no means as badly situated as the farmer whose debt situation has been compounding for four to five years. These are the farmers who are in trouble. For them, the Government assistance will: meet only

part of the debt relating to a single season. A typical case concerns a fanner on 1020 acres, with a Government valuation of $BO,OOO and a mortgage of $25,500. During the 1967. 68 year,' he ran 2000 breeding ewes and 500 replacements. Sales for the year included $5BOO for lambs and cast-for-age ewes, $4600 for wool, $3OO for cattle, and $l5OO for grain and produce, a total of $12,200. Total working expenses amounted to $7900, standing charges such as insurance, interest'and rates $3OOO, and depreciation $lOOO, leaving a profit, before personal drawings, of a mere $3OO. Affected by adverse seasons, the financial position continued to deteriorate. Five seasons of - working at a loss resulted in a cumulative figure of more than $17,000. To meet this sort of situation, the farmer must refinance. Overdraft, which by now has become hardcore debt, has to be accommodated by way of mortgage, and then he faces the prospects of another season, and the cost-price structure still going against him. This is what the s4sm payout to fanners is all about.