New Zealand’s biggest farmer, state-owned Landcorp will return just $10 million to government coffers.

However, the company managed to claw its way back from dismal half-year results showing a $3.1 million operating loss to produce a $7 million net operating profit for the 2008/09 financial year.

This was down $4 million on last year.

Landcorp’s annual report was tabled in Parliament yesterday afternoon.

Plummeting land values has led to an overall loss to shareholder return of $76 million – a massive $351.5 million down on last year’s overall $275.5 million return. During the 2008/09 year, land values declined 8% against a massive 21% increase the previous year.

The result was affected  y the sharp fall in annual payout for dairy producers, rocketing farm input costs and production inputs. There was also continuing severe drought impact in the previous year and a slowdown in the section sales of property development subsidiary Landcorp Estates.

Chief executive Chris Kelly said dairy revenues took a 24% hit during the year, shaving about $20 million of Landcorp’s bottom line.

He said if dairy returns had been as strong as predicted early in the season at around $7 per kilogram of milksolids (kgMS), Landcorp would have had a record year.

“When the payout dropped (to $5.20kgMS) we regigged all our cost structures to cope,” Mr Kelly said.

As a result, the dairy arm of the business only produced a slight profit.

Total revenues for the year increased 6% to $174.1 million with good gains in sheepmeat and deer offsetting the declines in dairy and beef.

Mr Kelly warned that lamb prices could soon tumble eroding the gains the sector made during the year.

“I’ve been told by a leading processor that lamb prices could go down to $60 again,” Mr Kelly said.

Currently lamb prices are close to $100, largely due to procurement wars between processors. Lamb losses during the recent cold snap, however, could increase supply pressure after Christmas maintaining a higher price.
In dairy, Mr Kelly said Landcorp was continuing to review its cost structure and said he was hoping to be in a much better positions this time next year.

“The dollar is start to hurt though and we are worried about the talk that it will hit 80c.”

Roughly every cent the New Zealand dollar increases against the US shaves about 10c kgMS off the dairy payout.

Landcorp runs 1.6 million head of stock across its dairy, beef, sheep and deer farms.