The cyclical nature of sheep and beef farming

The cyclical nature of sheep and beef farming

Estimated Reading Time: 4 min

Back in March 2024, I presented at a Beef and Lamb monitor farm day where the theme of the day was “Riding out the storm and being prepared for sunshine” and “knowing when to cut your losses and turn your focus to next season”.

Fast forward to August 2026 and sheep and beef farming is enjoying far more favourable conditions. If I were presenting to that same group today, the theme might be “enjoying the sunshine and building resilience.”

The last five years have provided a powerful reminder that sheep and beef farming remains a very cyclical business.

From sunshine to storm

In 2020 and 2021, many farmers were benefiting from strong commodity prices, low interest rates, and supportive borrowing conditions. International demand for New Zealand red meat remained robust and profitability across much of the sector was reasonably healthy. Many businesses used this period to reduce debt, invest in development, and strengthen their balance sheets.

However, the cycle turned sharply during 2022 and 2023.

According to Beef and Lamb New Zealand, sheep and beef farm input costs increased by more than 30 percent between 2020 and 2025, creating one of the most significant cost shocks experienced by the sector in decades. On-farm inflation reached 16.3 percent in the year to March 2023, the highest annual increase since the early 1980s. Fertiliser, fuel, feed, repairs, wages and rates all climbed, but it was interest costs that hit many farmers the hardest as rapidly rising interest rates flowed directly into farm businesses.

Unfortunately, rising costs coincided with weakening sheep meat markets. Demand from China softened and lamb and mutton prices fell below historical averages. This created the classic margin squeeze. Costs were escalating rapidly while livestock revenue was declining. For many farmers, the focus shifted from maximising profit to preserving cash flow, protecting livestock performance, and making difficult but necessary business decisions.

That was the basis of the message in March 2024: concentrate on what you can control, make decisions early, and don’t be afraid to cut losses in one season to protect the next.

The cycle turns

Fortunately, the cycle began turning again in late 2024. Interest rates eased, fuel and fertiliser costs softened, and stronger international demand lifted both beef and lamb prices. Farm profitability recovered and confidence returned. By 2025 and into 2026, livestock prices reached levels few would have predicted during the difficult days of 2023 and 2024, providing a much-needed boost to farm incomes and rural communities.

While there is every reason to enjoy the current sunshine, history suggests that today’s high prices should be viewed as an opportunity rather than a guarantee. The strongest farming businesses are often those that use good years to prepare for the next downturn.

Using the good years to build resilience

That preparation may involve reducing debt, investing in infrastructure and technology, improving livestock genetics, or addressing deferred maintenance that was postponed during the tougher years. It may also mean taking a closer look at business resilience, ensuring the farm can withstand future fluctuations in commodity prices, interest rates, seasonal conditions, and regulatory requirements.

The difficult years of 2022, 2023 and 2024 reminded us how quickly margins can disappear when costs rise faster than revenue. Those lessons should not be forgotten simply because prices are currently strong. Building financial resilience during profitable periods creates options when conditions inevitably become more challenging.

The lesson from the past five years is clear. Good times and challenging times are both inevitable in farming. Success is not measured by how a business performs during the peak of the cycle, but by how well it positions itself across the entire cycle. Farmers who use today’s record prices to strengthen their balance sheets, invest wisely, and improve business resilience will be better placed to manage whatever challenges the next cycle brings.

After all, in sheep and beef farming, the storm and the sunshine are both temporary. The goal is not to predict which comes next, but to build a business capable of thriving through both.

About Dave Bartram