Sheep and beef farming rebounds strongly: What a good year means for your tax and cash flow

Article
Published: 
Authors: Dallas Peters

After several difficult seasons, 2025–26 is shaping up to be a standout year for New Zealand’s sheep and beef sector. Strong global demand, favourable pricing, and a softer NZ dollar have combined to deliver a sharp rebound in farm profitability, providing welcome relief for farming families and rural communities. 

It's looking like this could be a really strong profit year for New Zealand's sheep and beef farmers. While this is positive news, it also brings new planning challenges, particularly around tax, cash flow and compliance.

We spoke to Kristy Staples, BDO Consultant and Sheep and Beef Farming specialist based at our Manawatu office to find out more. 
 

What is driving the strong season?

Recent industry reporting points to several clear drivers behind the improved outlook. Global demand for red meat remains strong, particularly from North America, Europe and the United Kingdom, where domestic production is constrained, supporting higher lamb and beef prices at the farm gate. 
 

“A softer New Zealand dollar has further boosted export returns, amplifying the impact of strong pricing. Together, these factors have contributed to a sharp lift in farm incomes following two seasons where rising input costs and softer returns placed significant pressure on businesses.”  – Kristy Staples, BDO Consultant and Sheep and Beef Farming specialist 


Wool markets have also shown signs of improvement. While returns remain modest compared to historical peaks, prices have lifted from recent lows, supported by renewed interest in strong wool and new higher‑value applications.  
 

What farmers are telling us 

Across the sector, farmers are telling a similar story. After managing through post‑COVID challenges and difficult seasons, many are now seeing profits well above expectations. In some cases, income is significantly higher than last year, prompting questions about tax obligations and how best to manage surplus cash. 
 

“This shift in fortune is encouraging, but it can also catch businesses off guard if planning does not keep pace with performance.”  

 

Why a strong year brings new risks 

High‑profit years often create unintended risks if not actively managed. Provisional tax obligations may no longer align with prior‑year estimates, increasing the likelihood of use‑of‑money interest if payments are underestimated. Cash flow can also become uneven, particularly where income and expenses are not evenly distributed through the year. 

There are also broader uncertainties to keep in mind. Ongoing geopolitical tensions, including conflict in the Middle East, have the potential to disrupt freight routes and push up fuel, fertiliser and supplementary feed costs if conditions deteriorate. Demand from China remains softer than traditional high‑value markets, which may affect product mix and pricing over time.  
 

Key tax and cash flow considerations 

In a strong year, proactive planning becomes essential. A good place to start could be: 
  • Bring your financial records up to date early to allow for more accurate tax forecasting and reduce the risk of unexpected liabilities.  
  • Review your provisional tax position 
  • Budget for upcoming payments 
  • Stress‑test cash flow against changing costs to help protect gains made during favourable conditions. 
Good years can also provide an opportunity to repair balance sheets, fund deferred maintenance, reduce debt, or reinvest in resilience, provided decisions are made with a clear understanding of obligations and timing. 
 

Looking ahead 

While current indicators remain positive, the sheep and beef sector is no stranger to cycles. Using a strong season to plan ahead can make a meaningful difference when conditions inevitably change. 
 

How BDO can help 

BDO works closely with sheep and beef farmers and agribusinesses across New Zealand. Our advisers help clients understand what strong profitability means for their tax position, cash flow, and longer‑term plans, so today’s gains translate into sustainable outcomes. Talk to our Agribusiness team today. 

Key takeaways

  • New Zealand’s sheep and beef farming sector is rebounding strongly in 2025–26, with industry forecasts pointing to one of the best profit seasons in decades. 
  • Key drivers include strong global red meat demand, limited overseas supply, higher lamb and beef prices at the farm gate, and a softer NZ dollar boosting export returns. 
  • Wool prices are improving from recent lows, supported by renewed interest in strong wool and new higher value uses, though returns remain below historical peaks. 
  • Higher profitability can create tax risk: provisional tax based on prior years may be too low, increasing the chance of underpayment and use of money interest. 
  • Strong years can still strain cash flow because farm income and expenses are uneven across the year - budgeting and timing of payments matter. 
  • Practical steps include getting accounts up to date early, reviewing your provisional tax position, budgeting for tax and other upcoming payments, and stress testing cash flow against changing input costs. 
  • External risks such as geopolitical disruption to freight routes and higher fuel, fertiliser, and supplementary feed costs can quickly shift conditions, so planning for volatility is essential. 
  • Surplus cash in a good season can be used strategically to repair balance sheets, reduce debt, fund deferred maintenance, or reinvest in farm resilience, ideally with tax and cash flow implications mapped out first. 

Authors

Dallas Peters | BDO Invercargill
Dallas Peters
National Agribusiness Sector Leader, Advisory Partner