Economic Impact of the 2007 East Coast Drought on the Sheep and Beef Sector
Appendix 1 East Coast Drought Economic Impact Value-Added / GDP Calculation
Table 5 of the main report includes figures showing the impact of the 2007 drought on the sheep and beef farming sector, over the period 2005/06 to 2008/09.
This short paper explains the derivation of the Value-Added figures in the table.
The Value-Added figures take into account three factors:
¡ The total revenue change impacts of the drought, as indicated by the changes in farm Net Cash Income
¡ Total on-farm expenditure changes including and following the drought year (these are indicated in Table 2 in the main report).
¡ The impact of farm ‘income equalisation’ whereby a proportion of additional income received in the 2006/07 year from the selling of significant amounts of additional livestock is placed in a farm equalisation account and used in the following year for the purchase of replacement livestock. For the purposes of this report, the direct value of the farm equalisation fund at the regional level has been calculated at $43.6 million, with a total Value-Added impact of $47.5 million including multiplier effects.
Table (a) below indicates the calculation of the Value-Added/GDP figures for the ‘without drought’ and ‘with drought’ situations.
Table (a): East Coast Region Sheep/Beef Sector Final Value-Added/GDP Impacts 2005/06-2008/09
| Year | ‘Without Drought’ Value-Added/GDP Impacts($M) | ‘With Drought’ GDP Impact ($M) | ||
|---|---|---|---|---|
| (1) 1 | (2) 2 | (3) 3 | ||
| 2005/06 | 797.1 | 797.1 | 797.1 | 797.1 |
| 2006/07 | 831.5 | 945.0 | 965.3 | 917.8 |
| 2007/08 | 861.5 | 639.3 | 674.2 | 721.7 |
| 2008/09 | 933.2 | 702.7 | 636.5 | 636.3 |
| Change 2005/06-2008/09 | +137.1 | -94.4 | -160.6 | -160.8 |
Notes:
1. The figures in this column take into account only the Gross Output/Revenue changes generated by the drought.
2. The figures in this column also incorporate the impact of the annual changes in total sector expenditure indicated in Table 2 of the main report (reduced expenditure increases Value-Added and vice versa).
3. The figures in this column reflect the figures in Column 2 adjusted for the impact of income equalisation. The total Value-Added impact of the income equalisation fund is subtracted from the 2006/07 result in Column 2 and added to the 2007/08 figure in Column 3.
Contact for Enquiries
Manager
North Island Regions
Sector Performance Policy
MAF Policy
Hamilton
NEW ZEALAND
Phone: +64 7 957 8313
Contact this person
