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Environmental stewardship trumps big returns, research shows

Media Release
16 September 2014
- for immediate release

Environmental stewardship trumps big returns, research shows

Farmers on properties with a net annual profit less than $50,000 list ‘minimising pollution’, ‘improving the condition of the property’ and ‘ensuring employees enjoy their job’ as more important objectives than ‘expanding the business’ or ‘making a comfortable living’.

That’s according to the latest results from research conducted by Lincoln University Senior Lecturer in Farm Management Research, Dr Kevin Old, and Research Fellow, Dr Peter Nuthall, who sought opinions and preferences with regard to farm succession and governance.

According to the researchers, the prioritised objectives of less profitable farmers may reflect a mindset which has largely dismissed the idea of achieving larger returns or expanding the business on grounds that these are essentially unobtainable. As such, job satisfaction or meaning comes from notions of environmental stewardship or quality of life.

Interestingly, farmers on properties with lower returns also placed ‘attending field days’ as one of the lowest objectives.

For more profitable farms (those with a net annual profit of $100,000-$150,000) the same objectives appear as top choices, albeit in a slightly different order. These farmers put ‘it is important to make a comfortable living’ at the top of the list. However, the other top ranked objectives are in the same order with ‘minimise pollution’ fitting in after ‘ensuring employees enjoy their job’.

Of great surprise to the researchers was the objective ‘it is important to pass the farm to family’ being placed at the bottom of the list as the lowest ranked objective.

The research consisted of two surveys which covered the entire country and all farm types. One survey was carried out in 2006 (with over 700 replies analysed), while the other was conducted in the latter half of 2013 and involved more than 2000 farmers from which a response rate of 36 percent (805 farms) was achieved.

New Zealand has historically had an orientation toward the family farm: ownership systems were simple, and most farms kept one or two people fully occupied. Likewise, objectives were orientated toward farming ‘as a way of life’. The research aimed at ascertaining whether this traditional model has changed and to what degree.

It was found that the average age of farmers in New Zealand in 2006 was 50, but in 2013 this had edged up to 53. The average farm size has similarly increased, from 557 hectares in 2006 to 591 hectares in 2013.

The average number of people working on the farms has also increased. In 2006 it was 2.05, whereas the figure for 2013 sits at 2.76.

The researchers noted that changes in employment levels per farm are most pronounced in the dairy sector. This is no doubt due to growth in the sector which has seen dairy production increase from 951.5 kilograms of milksolids per hectare in 2006 to 1134.3 kilograms of milksolids per hectare in 2013 (compared with a drop in lambing productivity from 130.3 percent to 127 percent).

The South Island in particular has seen a notable increase in average farm size, which has gone some way to contribute to the fact that 3.2 percent of all farms in New Zealand – all of which are dairy operations – now have eight or more people working on them.

Across all farm types, 25 percent are run by a single person. Farms with two people make up a further 41 percent, with three person farms covering an additional 13.5 percent. As such, close to 80 percent of farms in New Zealand are still low labour operations.

Of note, 20 percent of all New Zealand farms are sheep farms and have three people or fewer working on them.

It was also found that sheep farms experience less of a problem finding sufficient labour than dairy operations.

Along with the increasing age of farm managers, the number of years which farmers own their farms is probably increasing. Currently the average length of ownership is 25 years.

Another change is likely to be in the number of farms each farmer has an interest in. While nearly 60 percent of farmers are involved with only one farm, the average across all farm types is 1.75 farms. This number is increasing, however, largely due to the growth in dairying, with some farmers holding an interest in more than seven farms.

It was found that family farms have a variety of ownership systems. Private companies are becoming important, with 14 percent of the respondents noting they have such a company. This might be combined with various other ownership systems, of which a trust could be one. In fact, the results showed that trusts factor into 47 percent of all properties in one form or another. Of the respondents, only 1.24 percent reported a public company ownership model.

Of all partnerships, around 70 percent involve a spouse. An additional 25 percent also involve one or more family members, but partnerships with non-family members are uncommon. A farmer’s spouse is also an important person in the case of trusts.

The researchers found that, on the whole, family ownership systems are such that the farmers themselves make most of the decisions. Indeed, the farmers reported they were the main decision maker on 71 percent of the farms, although they do frequently consult other family members before acting. It is suspected that this has probably changed over the years. Overall, it is likely that family members and other ‘important people’ are increasingly consulted.

All in all, while farms are certainly getting larger and farmers are staying longer on their farms, ownership systems largely remain relatively simple, and farmers continue to make most of the decisions on their own. Likewise, farmer objectives probably haven’t changed much, although the extra emphasis on the environment and sustainability was surprising.

“If you believe all that you read you would get the impression that New Zealand farming is going corporate,” says Dr Peter Nuthall. “But, while it is true that some corporate or quasi-corporate family arrangements exist, by far the majority of farms are simple family affairs.”

Ends

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