Economic Impact of the 2007 East Coast Drought on the Sheep and Beef Sector
The East Coast Sheep and Beef Sector
As a background to the economic impact analysis of the drought, this section of the report provides an analysis of the current economic scale and contribution of the East Coast sheep/beef sector, recent trends in the sector’s performance and the medium-term outlook for the sector. As the drought occurred during the rural production year ending June 2007, the previous 2005/06 production year is the base year for this profile analysis, as well as the economic impact assessment.
The main information sources for the sector profile are the Ministry of Agriculture and Forestry, Meat & Wool New Zealand, Statistics New Zealand and the University of Waikato Economics Department (Dr Warren Hughes, Visiting Professor and economic impact specialist).
Farm Numbers
In 2005/06, the total number of commercial sheep/beef farms operating in the East Coast region stood at an estimated 2,595 or approximately 20% of the national total. The Gisborne area accounted for 15% of the region’s total farm numbers, Hawke's Bay area 45% (Hastings and Central Hawke's Bay districts, which were affected most by the drought, account for over 80% of all Hawke's Bay sheep/beef farms), Tararua district 20% and Masterton/Carterton/South Wairarapa districts 20%. Meat & Wool New Zealand figures indicate an overall 11% decline in the numbers of commercial sheep/beef farms operating in the region since 2000/01, compared to -13% nationally. In terms of the broad sheep/beef farming categories in the East Coast, their respective contributions to total farm numbers in 2006 were Gisborne/Wairoa Large Hill 23%, Hawke's Bay/Wairarapa Hill Country 45% and Eastern Lower North Island Intensive Finishing farms 32%.
Livestock Numbers
In 2005/06, total livestock numbers across East Coast sheep and beef farms stood at 10.9 million or approximately 25% of the national total. The respective figures for the 2004/05year were 10.8 million (approximately 1% below the 2005/06 result) and 24%. Within the region, sheep accounted for 90% of the total number of livestock last year and beef cattle 10%, similar to the national profile. The East Coast was the leading region in the country in terms of sheep numbers and second in terms of cattle numbers.
Gisborne/Wairoa Large Hill farms last year accounted for 31% of the East Coast region livestock total, Hawke's Bay/Wairarapa Hill Country farms 47% and Eastern Lower North Island Intensive finishing farms the balance of 22%.
Production
In economic impact terms, Gross Output measures the total current value of goods and/or services produced by an industry or sector (aggregation of industries) during the year. Alternative terms used for the same indicator are total sales or total turnover.
Economic impact modelling work undertaken by the University of Waikato for the purposes of this report indicates a total direct Gross Output value in 2005/06 for the East Coast sheep/beef farming sector, of $1,685 million. This represents the total ‘farmgate’ value of production. The sector accounts for 49% of the Gross Output of all forms of agriculture and horticulture in the region, 38% of all primary production industries (including agriculture/horticulture/forestry/fishing/ mining-quarrying) Gross Output and 8% of ‘all East Coast industries’ Gross Output. The East Coast region last year accounted for some 25% of national Gross Output from the sheep/beef sector. Statistics New Zealand information indicates that sheep and beef farming sector Gross Output at the national level in 2005/06 was up 8.1% on the previous year and 14% on the 2001/02 year, in nominal terms.
Meat processing in New Zealand is closely linked to sheep and beef farming. East Coast region Gross Output from this industry last year was in the order of $1,447 million or 43% of total Gross Output from all the region’s processing activities. Together, sheep/beef farming and meat processing accounted last year for 14% of total ‘all industries’ East Coast region Gross Output.
‘Value Added’ measures the true economic contribution of an industry, as it excludes the impact of goods and services imported into an area as part of overall business or consumer/ household expenditure. In 2005/06, total Value-Added of the East Coast sheep/beef farming sector was $800 million or 36% of total primary production industries Value-Added. Value-Added for sheep/beef farming/meat processing combined was in the order of $1,179 million or 12% of ‘all industries’ Value-Added in the region. Sheep/beef farming in the East Coast accounted for approximately 20% of the national Value-Added total of the sector last year.
Just under half of the Gross Output of the East Coast sheep and beef farming activity is ‘exported’ outside the region (to the rest of New Zealand and overseas). This includes, for example, meat/wool being sent out of the region for processing elsewhere in New Zealand and wool exported overseas for processing. Eighty-five percent of the production of East Coast meat processing plants is also exported from the region, to the rest of New Zealand and overseas. The two industries combined accounted for almost 40% last year of total primary production and manufacturing ‘exports’ from the region and 35% of total industry ‘exports’ from the area.
Employment
Table 1 indicates the trend in employment within both the sheep/beef farming and meat processing sectors in the East Coast region and nationally, since 2000. The base data for the table is sourced from Infometrics economic consultancy group in Wellington.
Table 1: East Coast and New Zealand Sheep/Beef Farming and Processing Employment Estimates 2000-2006
| Year | East Coast | New Zealand | |||||
|---|---|---|---|---|---|---|---|
| Farming | Processing | Total | % of NZ | Farming | Processing | Total | |
| 2000 | 8,049 | 3,170 | 11,219 | 20.1 | 36,872 | 18,934 | 55,806 |
| 2001 | 7,721 | 3,605 | 11,326 | 20.0 | 36,271 | 20,249 | 56,520 |
| 2002 | 7,985 | 3,615 | 11,600 | 20.5 | 36,100 | 20,517 | 56,617 |
| 2003 | 7,656 | 3,646 | 11,302 | 20.8 | 34,116 | 20,293 | 54,409 |
| 2004 | 7,190 | 3,762 | 10,952 | 20.8 | 32,062 | 20,707 | 52,769 |
| 2005 | 7,086 | 3,752 | 10,838 | 20.6 | 31,456 | 21,141 | 52,597 |
| 2006 | 6,964 | 3,173 | 10,137 | 19.2 | 29,797 | 23,008 | 52,805 |
In 2006, sheep/beef farming accounted for 69% of combined East Coast farming/meat processing employment and meat processing 31%. Farming employment has been falling in the region since 2000 and processing employment since 2004. Since 2002, total sheep/beef sector employment in the East Coast has fallen overall by 13%, compared to 7% nationally. Farming employment at the national level has fallen by 19% since Year 2000. The region accounted for 23% of national sheep/beef farming sector employment in 2006, 14% of national meat processing employment and 19% of national employment for both sectors combined.
Pre Drought Sector Outlook
Ministry of Agriculture and Forestry forecasts in 2005/06 prior to the drought indicated steady growth in the East Coast sheep-beef farming sector over the medium-term, with total sector income expected to grow by 17% nominally over 2005/06-2008/09 and total farm operating expenses by 6%.
Contact for Enquiries
Manager
North Island Regions
Sector Performance Policy
MAF Policy
Hamilton
NEW ZEALAND
Phone: +64 7 957 8313
Contact this person
