“Farmers Worse Off Than Other Groups”

Press, Volume CX, Issue 32322, 13 June 1970, Page 40

“Farmers Worse Off Than Other Groups”

An over-all deterioration in the economic position of farmers, in comparison with other sectors of «the community, was reported yesterday by the Agricultural Production Council.

Because of cost increases and lower prices for some export products, farmers have secured very small gains from increases in production. However, the report does say: “When all factors are considered it would appear that farming, even at current farm prices, is still attractive in many cases if regard is had to the indirect as well as the direct income advantages derived from farming, and to the prospect of long-term capital gains.” It is recorded that between 1960-61 and 1969-70 production of all farm produce rose 33 per cent. Over the same period the total value of farm produc-

tion was estimated to have risen 48 per cent. This meant that the over-all return per unit of production (per lb of Wool or butterfat) was 11 per cent higher. Within this figure there was a decline per unit of wool of 27 per cent, a rise per unit of mutton and lamb of 50 per cent, of beef 94 per cent, and for butterfat 9 per cent. At the same time sheepfarmers’ costs have risen 23 per cent so that the purchasing power of a unit of their output in 1969-70 has risen 1 per cent compared with 1960-61, and dairy farming has declined 5 per cent. In 1969-70 net incomes on sheep farms were lower than in 1960-61 by $2OO. However, dairy farm net incomes were still $6OO higher Net Incomes In the most recent period, the report says, an estimated 16 per cent of dairy farms earned a net income below $2OOO, and 13 per cent earned a net income above $6OOO.

Forty-one per cent of sheep farms are estimated to have 'earned a net income above

$6OOO and 13 per cent appear to be in the “under $2000” group.

“An analysis of the equity position of New Zealand farms shows that fewer than 20 per cent have equities be, low 40 per cent.

The number of marginal farms, based on equity and size, is likely to be less than 3000.

The report notes that there would be round 1000 (or 5 per cent) of dairy farms and round 2000 (6 per cent) of sheep farms with low incomeearning power and equities below 40 per cent. However, the report adds that the number of sheep farmers with low earning power might be overstated, because no account has been taken of cropping in South Island sheep farmers’ incomes.

A comparison of farmers’ incomes with those of other self-employed persons shows that farmers are in a relatively worse position than in 1960-61. With incomes for 1960-61 represented as 1000, the figures for 1968-69 are: dairy

farming, 1021, sheep 987, manufacturing 1124, construction 1204, wholesale and retail 1126; average weekly earnings 1414, professional services 1368, and weekly nominal wage rates-1352, Taking the return' on capital in 1960-61 as 100, the report says that the returp bn dairy farms in 1969-70 was 48 and on sheep farms 63. The dividend yield on shares was 107 in 1969-70. It is noted, however, that net income figures probably understate the full return in farming taking into account taxation deductible expenditure and the increase in land value ’’not shown in income figures. .

While returns have fallen, rural land capital values have risen from 100 in 1960 to 178 in 1968, fallen back to 152 last year, but risen again to 183 this year.

“The scale of farming has tended to increase,” says the report, "in an attempt to maintain an adequate family income. Some smaller farm units do not have the ability or strentgh to support an increased cost structure. There

has been an increasing tendency for these to amalgamate or to be absorbed by larger units. “Some larger units under development have a heavy debt load, which at a time of lower net income is difficult to ■ service.”

.Betause of-structural problems aqd drought there has been a developing liquidity prbblein. Matty farmers, have attempted to meet this by short-term borrowing. In other cases there has been a reluctance to increase further the debt load, hence restricting development and maintenance. . “The.long-term solution of these problems i may require the extension Of financial facilities/’ says the council’s report. / Good- Opportunities The report also notes that case studies of extra capital investment in farming indicate very profitable development opportunities—an accounting rate of return on capital invested ranging from 10 to 50 per cent, with many cases returning 30 to 40 per cent.