Rate Of Stock Increase A Key Factor

Press, Volume CV, Issue 30965, 22 January 1966, Page 10

Rate Of Stock Increase A Key Factor

The rate of stock increase measured by an increase either in total ewe equivalents or in breeding stock completely dominated hill country economics, according to Air J. S. Holden in a paper presented to the last conference of the New Zealand Grassland Association on the economics of hill country development.

able after tax, the greater the increase in taxation. Thus the most sensible attack on the problem of taxation was to i fbrget it, forge ahead and • attain the maximum possible ■ rate of stock increase. This would, of course, increase ; taxation, but the case his--1 tones showed clearly that i this was a more profitable ■ strategy than slowing down • the rate of increase to mini- ■ mise taxation payments. Thus taxation was not : likely to be a dominant fac- ■ tor affecting profitability s itself, but unfortunately it • was still a factor affecting > farmers’ decisions about the i profits they wanted to make. : They were possibly too wor- ’ tied about the size of the cheque to the Inland Revenue I Department and forgetful of i the rise in after-taxation , profits. t Mr Holden said he found t no clear relationship between I the speed of development ! and profitability. A farmer ! who rushed in and opened up tan impressive amount of - country in a short time would be successful only if his finances permitted him to stock that country as heavily 1 as possible at the same time. ■ Whether development 1 should be financed out of in- ’ come or by creating some risk 1 and borrowing was entirely ' up to the individual farmer J and his willingness to under- ' take risks. Of course the in--1 crease in take-home pay - occurred much earlier if the f money was borrowed simply : because the job was likely to ! go faster. But careful plan--5 ning and attention to the 5 stocking situation would let 1 any level of borrowing be pro--1 fitable. ! Borrowing Rules ! Thus the two rules of bor- > rowing as he saw them were: 5 (1) increase stocking as fast as possible within the labour - limitation, and (2) borrow if ' necessary to provide the t money for development and ' stock to achieve this. The only limit was the risk ■ the farmer was willing to - undertake. If he was correctly r advised and provided with > plans his uncertainty would £ be reduced and the job accom- > plished more quickly because > his subjective borrowing limit • could be increased.

Speaking on the basis of a close study of 16 development programmes and as a result of contact with another 15, Mr Holden said that the increases achieved in profitable programmes were consistently greater than those in other cases. The dividing line was somewhere in the region of 5 to 7 per cent a year. This finding on reflection, was fairly obvious anyway, but a depressingly large number of farmers even today began farm development and then increased stock subsequently as stock, or as the money to purchase it, became available. In other words their primary consideration was acres in grass and stock on grass became a secondary consideration. “I would recommend all farmers and advisers when contemplating development, I to plan the stock picture first and tailor the development programme to it,” commented Mr Holden. “In this way the money invested in clearing grassing and improvement becomes productive immediately.” Risk Of Loss A distinct possibility of a loss would always arise when development was continued with the aim of increasing production per stock unit alone. This arose partly because the additional inputs required to raise wool weights per sheep were of an annual nature. For example another hundredweight of fertiliser an acre might be needed but it would be 'needed every year. If, on the I other hand, stock numbers were increased the additional numbers needed were both self perpetuating and much easier to control than the extra grass and extra grazing management required to achieve and maintain the extra production a sheep. Mr Holden said he hesitated to include taxation under the heading of a dominant factor affecting hill country development economics. Certainly it had an effect on the take-home pay of the de- \ vel oping farmer, but only ; after the programme was finished under today’s tax laws. The case histories 'studied showed a remarkable ■ tendency to be more profit-

Too many fanners worried about the method of development. It was important, but only if no regard was paid to the stock available to eat the result of the development First there was no reason to suppose that because country was ploughable the method should include cultivation. If the country was ploughable cultivation paid only if the stock would benefit from the winter feed crop and if the extra mouths were available to fully utilise the new grass right from the start. In the second place every district had its best method of producing new grass on its flat or its hilly country.

Labour Factor

Mr Holden said he had got the impression from the case studies that the effect of extra labour was second only to the problem of extra stock. Labour only came in lumps and the problem arose when a decision had to be made about hiring the next lump and building a house. From all he had said it would be clear that labour increases were only justified if the stock was available to pay for it. The profitability of development would thus be increased if some way of increasing stock past the oneman level (say 1500 to 1600 ewes) without extra labour was used. For example a dry flock could be used, or a Perendale flock and the additional grass could be stocked to capacity with these. Mr Holden said that no mention has been made of fertiliser rates, breeds or breeding programmes, stock potential, cost of fertiliser and so on. He considered these unimportant in most hill country development programmes. The initial fertiliser application might need careful consideration, but thereafter the minimum rate required to maintain the much increased stock would rarely be above 3cwt per acre. None of his conclusions could be implemented by rushing out and buying more sheep, he said. They could only be implemented by very careful and detailed planning of future steps with a correct evaluation of the economic impact of each step. The Department of Agriculture was willing to undertake this planning within the limits of its staffing. He could only suggest that farmers contemplating further development consult an adviser and with him incorporate these ideas into a development plan which firstly showed possible stock increases year by year and secondly provided sufficient feed for this stock.