National Average Market Values (Herd Scheme Values)

The Herd Scheme is a value based livestock system.

Around May or June of each year the Government of the day announces the values which are to be attributed to the various classes (age groups) of the specified livestock types (i.e. Sheep, Beef, Cattle, Dairy Cattle, Red Deer, Wapiti, Goats and Pigs).

These values are calculated from a survey of livestock valuers at the 30th of April each year. This year's market values at 30 April show some very significant movements within the major livestock types. Major Lifts in values can be seen for Sheep, Beef & Dairy cattle and Deer. Goat and Pig value movements vary according to the age group.

The accounting mechanics involved in the herd scheme are a bit involved, but basically it protects the farmer from increases of the market values of livestock between the years becoming assessable income.

However any new livestock included in the herd scheme for the first time do create assessable income (to the extent that the Herd scheme value exceeds the cost of the animal). It is therefore preferable to add additional livestock numbers to the herd scheme in years when the herd values are low.

An option is therefore to treat the additional numbers (those in excess of what we valued on the herd scheme last year) at the lower National Standard Cost or Replacement Value cost options.

IRD have signalled a likely tightening on the ability of a taxpayer to move between schemes, more detail will emerge during the year but should not endanger the long term advantages of the scheme.

Sheep

For the second year in a row the national average market values for mature classes of sheep have risen. Since 2008, $100/head has been added to the value of a Two Tooth Ewe. An industry shortage of breeding stock and two major weather events during last year has seen the value of lamb and therefore breeding ewes reach all time highs. With these levels of value looking to be more than a short term blip, this is good news for those who entered the herd scheme in 2008 or 2009. Excess sheep numbers this year are likely to be valued on the lower NSC cost method.

Beef Cattle

Beef values have also climbed the commodity price ladder and recorded low to moderate gains for non breeding steers and more significant gains for capital breeding classes. This would seem to back up our broad approach of really only considering the herd scheme for breeding livestock in the beef sector.

Dairy Cattle

Dairy values have continued to bounce back upward from their 2009 year drop, on the back of an expected $7.50 (Fonterra) milk payout. Cow values are highly dependant on the value of a milksolid. If the NZ dollar's high exchange rate negatively impacts on the auction based milk powder market we could see levelling off of livestock values. Anyone selling animals out of the Herd Scheme will be smiling, while it will be increasingly difficult to enter extra numbers into the scheme with any real confidence.

Deer

Female and non breeding male deer have experienced moderate gains this year. Overall Deer values appear to be the steadiest of all the types of livestock. Again having breeding animals in the herd scheme is a good long term strategy, provided the entry cost is not excessive.

N.B. If any livestock of a type are valued in the herd scheme then the breeding males must also be valued on the herd scheme.